T-Mobile Offers to Cover Termination Fees for Switchers

T-Mobile US is taking aim at one of the biggest barriers to switching cellphone carriers: early termination fees.


On Wednesday, the company unveiled plans to cover the onerous fees, which usually run more than $300, for consumers who divorce their carrier and join T-Mobile. Under the offer, a consumer can receive up to $650 in credit after trading in a phone.

It’s the latest move from T-Mobile, the nation’s No. 4 carrier, to gain market share. The company, through its so-called Un-carrier campaign, is trying to lure customers away from rivals by moving away from the industry norms, like two-year contracts and international roaming fees.

“Customers tell me repeatedly, I love what you’re doing, I wish I could switch, but I’m handcuffed,” said John Legere, T-Mobile’s chief executive, at the company’s press conference on Wednesday.

T-Mobile’s efforts come at a pivotal time for the wireless industry. The wireless phone networks that juggle Internet data and phone calls for millions of smartphone users are more vital than ever. But consumers are growing increasingly frustrated.

In a business conference last year, Daniel Hesse, chief executive of Sprint, cited a survey that found the reputation of wireless carriers had dropped to the lowest level among any major industry.

“Even the cable and oil industries rated higher than we do,” he said at the conference.

In its latest initiative, T-Mobile says it wants to make switching to its network as simple as possible. To get the customer credit, T-Mobile customers must trade in their own smartphone for up to $300 in credit, depending on the phone and its condition.They will then receive up to $350 for each line that incurred a termination fee.

To qualify, customers will have to show documentation that they left a carrier and paid an early termination fee. A customer will also need to buy a new phone. Only customers of the three major carriers, AT&T, Sprint and Verizon Wireless, are eligible for the credit.

T-Mobile’s strategies have so far been well received by consumers. In August, T-Mobile achieved its highest customer growth numbers in four years, and its momentum continued through the rest of the year.

Clearly, AT&T views T-Mobile as a threat. In the face of rumors that T-Mobile would offer to cover termination fees, AT&T said last week that it would offer credit specifically to T-Mobile customers to switch.

In response, John Legere, T-Mobile’s executive, called it a “desperate move.”

“I’m flattered that we have made them so uncomfortable,” he said in a statement. “We used AT&T’s cash to build a far superior network and added Un-carrier moves to take tons of their customers – and now they want to bribe them back,” he said, referring to the money T-Mobile received when its deal with AT&T fell apart.

The tension between the two parties is getting personal. Earlier this week, Mr. Legere showed up at an AT&T party uninvited. AT&T, alerted to his presence by social media, had him removed from the event.