Why T-Mobile Promises Not to Raise Prices for Faster 5G Mobile Service
Customers of T-Mobile who upgrade to faster 5G-compatible phones coming in the second half of the year won’t have to pay any more for faster 5G mobile service on unlimited data plans.
Wall Street has been puzzling over how mobile carriers plan to justify the billions of dollars carriers like T-Mobile and rivals AT&T (T), Verizon (VZ), and Sprint are spending to roll out the speedier connections that could make download speeds 10 to 40 times faster than today’s 4G LTE networks. For the carriers, providing the bandwidth should be cheaper with 5G, but some analysts expect the companies also to introduce premium pricing plans.
That won’t be the case at T-Mobile, says president Mike Sievert. “We don’t have any expectation of changing your plan,” Sievert tells Fortune. “5G’s arriving now, speeds and capacities will improve, and customers will be able to get all that at an incredible value. We have no plans to change our rate plans…we have no plans to price separately for it on your smartphone.”
But T-Mobile expects to make more money with additional 5G services, like home broadband, and from people upgrading to an unlimited plans from cheaper plans currently, he added.
T-Mobile’s pricing is under scrutiny as both federal and state regulators continue to evaluate its proposed merger with Sprint, first announced in April. Earlier this week, CEO John Legere sent a letter to Federal Communications Commission chair Ajit Pai pledging not to raise prices for three years on any of its current mobile plans if the merger is approved.
Critics said perhaps T-Mobile’s pledge was leaving wiggle room for higher-priced, new 5G plans. Legere said emphatically on Thursday that was not the case. “We’ve been very clear that in this transaction, supply will go up and prices will decline,” Legere tells Fortune. “If you were concerned that prices were going to go up in the first three years, let me just tell you, no, they’re not. People jumped on [5G] and said that’s a loophole, it’s a trick. We just said no.”
T-Mobile currently offers a standard unlimited plan starting at $70 a month for one line and up to $140 for four lines, which includes a free Netflix (NFLX) account. Adding a package of premium features like high-definition streaming video, fast data for a tethered laptop, and high-speed data usage outside of the United States costs an extra $15 monthly per line. The carrier also offers a striped down “essentials” unlimited plan starting at $60 per month with fewer features and no free Netflix.
T-Mobile (TMUS) is preparing to offer mobile 5G service in major cities later this year and nationwide in 2020. The goal is the same whether or not regulators approve the carrier’s deal to merge with Sprint (S), a combination that would greatly increase the amount of airwave spectrum available for future 5G offerings. “We’re moving at real pace,” says T-Mobile chief technology officer Neville Ray, who adds that T-Mobile has already deployed but not yet brought into service 5G equipment covering “hundreds of thousands of square miles.”
While rivals AT&T, Sprint and Verizon have named some specific cities where they are bringing at least some form of partial 5G services initially, T-Mobile isn’t ready to reveal much about its exact plans yet. Last year, T-Mobile said it was building mobile 5G service in 30 cities including New York, Los Angeles, Dallas, and Las Vegas. Ray says his competitors’ announcements so far don’t amount to much, especially since they rely mainly on high-bandwidth airwaves like 28 GHz. “We have the same gear, the same software–it’s just not ready for commercial or prime time services yet,” he says.
Some Democrats in Congress have recently expressed concerns about the Sprint merger and will hold hearings in the House of Representatives next week. But Legere said he remains optimistic of approval in the first half of 2019.
“It’s clearly the bottom of the ninth inning,” the CEO says. “I am highly, highly confident that we will have approval of this transaction and it will be the first half.”
As the approval process nears the final verdict, Legere said he expects critics to ramp up. “What happens in the bottom of the ninth inning when multiple parties are concerned about the score? It’s going to be a nutty environment,” he says. “We’re not going to take the bait. We’re going to continue to stay focused.”