T-Mobile Woos Customers With Free Phones, Shorter Contracts

T-Mobile US Inc. is offering to buy mobile subscribers out of their three-year contracts with rival carriers, tossing in a new phone and promising a shorter commitment in an effort to lure new customers.

(Bloomberg) — T-Mobile US Inc. is offering to buy mobile subscribers out of their three-year contracts with rival carriers, tossing in a new phone and promising a shorter commitment in an effort to lure new customers.

The US’s second-largest wireless company says it will pay off the phone contracts for people willing to switch their service. As part of the limited time promotion, T-Mobile will also provide them with new phones on a 24-month, no-payment plan.

The free phone promotions that drove years of industry subscriber growth, have also helped mobile carriers lock customers in to increasingly long phone contracts that have become the glue that holds people to pricier service plans. In a promotional event on Thursday, T-Mobile called out its bigger rivals Verizon Communications Inc. and AT&T Inc., which have stealthily lengthened the default contract to three years.

With long phone contracts, penalties for early termination and perks like gas discounts, select concert seating and complimentary video streaming services, it has become difficult for subscribers to untangle from their wireless providers. That’s led to stagnation in a nearly saturated market, even as a handful of plucky startups are offering subscriptions at half the price.

The complicated process for switching providers has helped keep the churn rate hovering near or below a record low of 1% a month for more than a year. Customers even begrudgingly absorbed a round of inflation-related fee increases and price hikes last year.

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