T-Mobile predicted to save billions by cutting back on perks and phone discounts

By introducing a picks system, T-Mobile will limit the number of perks and handset subsidies customers can receive. Picks are reportedly a pseudo-currency awarded based on the plan tier and number of lines.

With a limited number of picks, most lines on a typical account will likely not qualify for phone deals. Customers will have to choose between benefits that were previously included. Seeking Alpha views the move as a price hike.

Going a step further than Verizon

Verizon doesn't bundle digital extras with its base plans, but it doesn't restrict access to phone deals, either. T-Mobile appears to be removing smartphone deals from half the lines.

The system is also rigid, giving customers a short window every quarter to allocate picks to perks. So if you damage your handset before the quarter is up, you won't be eligible for a new phone unless you happen to have reserved extra perks. 

If you choose a higher-tier plan and get your whole family on T-Mobile just to hoard picks, only to end up not using them, T-Mobile saves even more money.

A three-year commitment

With Experience 2.0, T-Mobile extended the installment period from two years to three years. The same will be true for T-Mix, tying subscribers to T-Mobile for longer. Since the discounts will be spread out over a longer period, the monthly cost of offering subsidies will also go down.

Fewer discounts spread over three years mean T-Mobile might have reduced its spending on subsidies by a third compared with last year. Some rough number crunching suggests these measures could boost profits by up to $4 billion a year.

Broken promises

When T-Mobile and Sprint were merging, District Judge Victor Marrero said he "couldn't imagine they'd be so bold" as to raise rates after the acquisition was approved. T-Mobile has hiked rates directly and indirectly numerous times since then.

Roughly a year ago, there were hopes of a price war. But far from rolling out competitive pricing, T-Mobile keeps finding new ways to increase prices.