<\/p>\n
T-Mobile is doubling down on cutting back free offers just as the carrier begins seeing signs that its efforts to improve customer retention are paying off.\u00a0<\/p>\n
After its postpaid phone churn (the percentage of customers who canceled their service) increased last year following several price hikes, T-Mobile began ramping up its efforts to attract and retain price-conscious customers.<\/p>\n
For example, it rolled out several lower-priced phone plans earlier this year, including its \u201cBetter Value\u201d phone plan, which starts at $46 per line. <\/p>\n
T-Mobile later dropped a free iPhone 17 deal and a \u201cGalaxy S26 Ultra on Us\u201d deal to encourage customers to upgrade their devices.<\/p>\n
T-Mobile later touted progress in strengthening customer loyalty in its wireless business, revealing during an earnings call on July 23 that its postpaid phone churn hit 0.85% in the second quarter of this year, down from 0.9% reported for the same period in 2025.\u00a0<\/p>\n
T-Mobile CEO defends dialing back free phone offers<\/p>\n
As T-Mobile sees improvement in retention, it is standing firm in its decision to reduce the number of free phone deals\/device subsidies it offers customers.\u00a0<\/p>\n
When asked about how this decision will play out during the upcoming holiday season, T-Mobile CEO Srini Gopalan said during the earnings call that the company has given consumers 250 reasons to switch to its network, extending beyond free phone offers.\u00a0<\/p>\n
\u201cOur effort really is to broaden out the reasons why people should choose T-Mobile rather than purely a free phone,\u201d Gopalan said. \u201cOf course, we\u2019ll be competitive on things like subsidy, but that\u2019s not what we\u2019re leaning in on.\u201d<\/p>\n
He also acknowledged that smartphone prices are rising as memory prices surge. This is mainly due to rising demand for artificial intelligence infrastructure, component shortages, and shifts in supply.\u00a0<\/p>\n
\u201cWhat we\u2019re seeing is clearly the memory price increases are resulting in higher prices for smartphones across the board,\u201d Gopalan said. \u201cOur intention, consistent with what we\u2019ve said, is not to increase our subsidy levels. That\u2019s going to mean that customers will have to pay more. That\u2019s just the result of that dynamic.\u201d<\/p>\n
Related: T-Mobile customers face new restriction when paying bills<\/p>\n
According to research and advisory firm Gartner, prices for memory chips DRAM and SSD are estimated to climb by 130% by the end of 2026. This is expected to result in smartphone prices increasing by 13% this year compared to 2025 levels, likely having a ripple effect on demand.\u00a0<\/p>\n
\u201cThis is the steepest contraction in device shipments witnessed in over a decade,\u201d saidRanjit Atwal, a senior director analyst at Gartner, in a press release. \u201cHigher prices will narrow the range of devices available, prompting buyers to hold on to devices for longer, fundamentally altering upgrade cycles.\u201d<\/p>\n
T-Mobile Chief Financial Officer Peter Osvaldik clarified during the call that the company isn\u2019t \u201cmoving away completely from device subsidies\u201d but is \u201cmore rounding off the value proposition.\u201d<\/p>\n
\u201cThe ability for us to attract customers beyond a subsidy-driven promotional environment, that\u2019s that flow of the current, because customers see the totality of the value that they\u2019re getting inclusive of more and more so the network, the significant reliability, the significant network experience, and (we\u2019re) starting to see a flow of network seekers coming our way,\u201d said Osvaldik.<\/p>\n
T-Mobile isn’t budging on its decision to reduce free phone offers as it sees churn improve. <\/p>\n
Shutterstock<\/p>\n
T-Mobile is responding to shifting customer behavior<\/p>\n
The comments from Gopalan and Osvaldik come after the company first warned earlier this year about its plan to cut back on free phone offers.\u00a0<\/p>\n
\u201c(We) can’t make iPhones any freer than they are today,\u201d said Mike Katz, then-chief business and product officer at T-Mobile, during an earnings call in February. \u201cAnd the truth is, customers\u2019 phone purchase is a point in time, you know, happens once every couple three years.\u201d\u00a0<\/p>\n
\u201cAnd between those times, they’re living with their wireless service every single day,\u201d he continued. \u201cAnd we think customers expect and demand more from us than just a free phone deal every three years.\u201d<\/p>\n
More T-Mobile News:<\/p>\n
T-Mobile adds new internet plan restriction customers will feelT-Mobile drops new free perks for customers as pressure buildsT-Mobile quietly expands a convenient service for customers<\/p>\n
T-Mobile isn\u2019t the only company straying away from offering free phones to customers. Verizon CEO Dan Schulman said during an earnings call in April that the company is pulling back on device subsidies as part of plans to reduce spending on promotional offers to drive more robust revenue growth.<\/p>\n
\u201cThe era of just the free handset, that\u2019s gone right now,\u201d Schulman said. \u2018We are looking at what does the customer need. They have a handset that is last year\u2019s model that\u2019s been refurbished. Do they need a new handset? Many of them, because of the economy, are keeping their handsets longer right now.\u201d<\/p>\n
As more wireless carriers reduce their free phone deals, Americans are holding onto their devices for longer periods to save money.\u00a0<\/p>\n
A survey from Reviews.org in September last year found that Americans keep their phones for nearly 2.5 years on average, which is far longer than the annual upgrade cycle. Also, 29% said in the survey that they plan to upgrade their phones in the next 6 to 12 months.<\/p>\n
T-Mobile expects a spike in customer losses<\/p>\n
Amid T-Mobile\u2019s plan to scale back free phone deals, the carrier expects to see a temporary spike in churn and a slowdown in postpaid account additions in the third quarter of this year.<\/p>\n
T-Mobile said this is mainly due to its decision in June to discontinue several older phone plans and push customers on these plans to newer ones that, in some cases, have higher price points.<\/p>\n
\u201cAs part of our full-year plan and guidance, we anticipated our Q3 (third quarter of 2026) rate plan modernization would result in a temporary elevated account churn profile and expect Q3 net postpaid account additions to be approximately 250,000,\u201d said Osvaldik during the company\u2019s earnings call.\u00a0<\/p>\n
Benchmark analyst Matthew Harrigan said in a recent analyst note obtained by Benzinga that his firm is confident in T-Mobile\u2019s pricing power despite its recent wireless plan changes, noting that over 60% of new customers are enrolling in its premium plans.<\/p>\n
“We remain optimistic on pricing power, with average monthly 2Q26 ARPA (average revenue per account) up 2% to $152.91 and ~60% of new account customers opting for the most premium plans with especially high lifetime value,” said Harrigan.<\/p>\n
Related: T-Mobile puts new limits on 2 wireless offers for customers<\/p>\n
#TMobile #CEO #doubles #reducing #free #offers #customers<\/p>\n","protected":false},"excerpt":{"rendered":"
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