T-Mobile US Alters Credit Policies to Spur Smartphone Purchases
T-Mobile US, in a new credit policy it calls “Smartphone Equality,” will use a different approach to assessing potential customer credit, a move T-Mobile US expects will allow it to sell smartphones to a significant number of new customers.
The problem, says John Legere, T-Mobile US CEO, is that as many as 50 percent of potential buyers do not qualify for the best plans T-Mobile US and other leading U.S. mobile service providers offer.
“For years, companies have based decisions about who gets the best prices and even access to basic products and services solely on credit scores churned out by software from a credit bureau,” says Legere.
“With today’s announcement, every T-Mobile customer who’s paid their wireless phone bill on time for 12 straight months will qualify for our very best device pricing on every smartphone and tablet we sell − including zero down with no interest and no credit check,” says Legere.
Legere is banking on one key assumption: that “our relationship with that customer is actually a better predictor of future behavior than their credit history.”
Some will worry about the potential exposure T-Mobile US might be taking in terms of bad debt. Others will look for further pressure on AT&T and Verizon net customer additions.
Verizon Wireless added 2.1 million net retail connections in the fourth quarter of 2014, including close to two million net retail postpaid connections.
On the other hand, churn was higher than usual churn and profit margins dipped. Verizon reported a quarterly loss of 54 cents per share, compared with earnings per share of $1.76 in the fourth quarter of 2013, based in part on charges related to benefit and pension plans.T-Mobile US is counting on the new policies to increase the number of smartphone and tablet customers in its customer base, a development that spurs adoption of mobile data plans and bigger mobile data plans.