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T-Mobile Fires Up Competition with Attractive iPhone Plan

T-Mobile US Inc.TMUS has introduced the cheapest iPhone plan ever. The company is offering its subscribers the latest iPhone 6s for as low as $5 per month, to be paid over a period of 18 months. The 'Jump on Demand' plan, as touted by the company, requires subscribers to trade in their devices in order to avail the offer.

Competitive Approach

T-Mobile has always adopted a competitive approach to counter its rivals. Even this time, although its competitors AT&T Inc. T , Verizon Communications Inc. VZ and Sprint Corp. S have already laid out attractive iPhone leasing plans, they might have a hard time matching T-Mobile's offer. According to a recent statement from the company, pre orders for the latest iPhone are already 30 percent higher than last year.

Competition has been fierce among the carriers since Apple Inc. (AAPL) announced its own leasing plan, compelling them to reduce their iPhone pricing. Currently, Verizon offers a $27 a month for 24 months plan while AT&T charges $21 per month for 30 months.

Comparatively, T-Mobile's plan is the cheapest so far, which allows customers to own an iPhone 6s for $5 a month by trading in their iPhone 6, 6 Plus, Galaxy S6 Edge or Note 5. Customers who trade in iPhone 5s or Galaxy S5 will have to pay $10 per month. The monthly payment jumps to $20 for those unwilling to trade-in their devices, which is still lower than that of its rivals.

The Risks

According to a UBS report, wireless carriers are engaging in the leasing strategy to gain more customers, which expose them to credit risk. The financial impact of such high leverage will be significantly adverse if the economic conditions deteriorate. Residual value of the surrendered phones, which the companies look to sell in other markets, may induce liquidity risk if the plan falls apart.

Bottom line

Due to the widespread popularity of iPhone and the products rising demand, the companies see leasing plans as growth opportunity. T-Mobile's latest offering showcases the intense competition prevailing in the telecom market. But whether it will sustain or not remains a wait and see story. One thing is for sure, the dream to own an iPhone is becoming easier to achieve day by day.

Verizon currently carries a Zacks Rank #2 (Buy).

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AT&T INC (T): Free Stock Analysis Report

SPRINT CORP (S): Free Stock Analysis Report

VERIZON COMM (VZ): Free Stock Analysis Report

T-MOBILE US INC (TMUS): Free Stock Analysis Report

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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