T-Mobile is "giving away" 5G phones in an attempt to move customers from its 4G network onto 5G, the company said today. The promo reflects the urgency of a company that's pushed to set aside plenty of airwaves for 5G, but has only gotten about 10% of its customers onto 5G phones.
"We have 287 million people covered by 5G," said Jon Freier, T-Mobile EVP of consumer markets. "Given this incredible 5G reality that our network team has created, it's time to put that to use."
There's a 5G dilemma afoot. As carriers set aside more airwaves for 5G rather than 4G, the improved performance and capacity is only available to people with 5G phones.
AT&T and Verizon have largely dodged this problem so far because they use so few 4G-compatible airwaves for 5G. As we've seen, though, that means those companies' "nationwide" 5G performance is generally the same, or even worse, than 4G.
But as T-Mobile has been growing its capacity over the past year, anticipating more customers, almost all of the capacity it's been growing has been in 5G. That means much better 5G performance, but only for people with 5G phones.
As of the end of 2020, T-Mobile had 102 million subscribers, according to Statista, with "north of" 10 million on 5G devices, Bloomberg says. That's only 10% of its users able to access any of that 5G network. For 5G to keep expanding—and for T-Mobile to have the headroom to steal more subscribers from AT&T and Verizon—it needs to move existing customers to 5G phones.
While most of the smartphones sold today support 5G, Americans generally only trade in their phones once every three years, according to Statista. The 5G transition has been swift, and most models sold even a year ago didn't support 5G.
A Free Phone: What's the Catch?
Thus the promo. It's pretty simple: starting April 18, anyone can bring any functioning cell phone, of any age or model, to T-Mobile and get a Samsung Galaxy A32 5G in exchange, with the $282 debt for the phone recouped over two years of bill credits.
This applies to everyone, as long as they have or want a T-Mobile line of service. They don't need to add a line, although they'll almost certainly need to be on, or upgraded to, a 5G-compatible service plan. "Bring those Razrs in, those Treos in," Freier said, not joking. "2021 is the year of 5G, and we're going to do this for the entire year."
The phone payment plan, of course, locks people into two years of T-Mobile loyalty; if you cancel before that, you'll owe whatever fraction of the cost remains. There are also some annoying extra fees, which may prevent this from being totally "free"—sales tax and a mysterious $20 "assisted or upgrade support charge."
Apple iPhone loyalists will get a different promo. iPhone 11 models, which Freier noted was the last 4G iPhone, will be directly tradeable for a new iPhone 12; older iPhones will be tradeable for half off either an iPhone 12 or an iPhone 12 mini (our Editors' Choice.)
"We want people to have a path to be able to easily, with no friction whatsoever, upgrade to a 5G device," Freier said.
Getting subscribers on 5G also means getting them on 5G service plans. All existing T-Mobile and Sprint limited-data plans will be upgraded to at least the equivalent of the T-Mobile Essentials service plan, the company said. AT&T and Verizon subscribers with limited-data, postpaid plans will be offered a T-Mobile unlimited plan for a lower rate than today's equivalent price for the same limited data plan.
Note the wording there: if you are on a very old, weird, inexpensive Verizon promotion, it looks like T-Mobile will match Verizon's current price for your data bucket, not whatever the older price was.
Once more, what's in this for T-Mobile? I think it's back-end rationalization. It gets a whole bunch of older service plans (especially Sprint plans) out of their system, and it gets to streamline its customer support and billing. And 5G service plans are another push to get users onto that green-field 5G network. "Why sit out there with those 4G phones and those 3G phones?" Freier said. "It's 2021. It's the year of 5G."