T-Mobile defends free offer cutbacks as early signs suggest its customer retention efforts are starting to work. After several price hikes last year led to more postpaid customers canceling their service, the carrier stepped up its focus on attracting and retaining budget-conscious users. For instance, earlier this year the carrier introduced several lower-cost phone plans. This includes its Better Value plan, starting at $46 per line.
T-Mobile’s free phone offer cutbacks signal a broader strategy shift
It later brought a free iPhone 17 deal and a “Galaxy S26 Ultra on Us” deal to encourage customer upgrades. The company later touted seeing progress in strengthening customer loyalty. During the July 23 earnings call, it said that the postpaid churn hit 0.85% in Q2, down from 0.9% a year earlier. With customer retention improving, T-Mobile is sticking to its decision to offer fewer free phones and device subsidies.
When asked about this decision coming during the upcoming holiday season, T-Mobile’s CEO, Srini Gopalan, said the company has given consumers many reasons to switch to its network, extending beyond free phone offers. “Our effort really is to broaden out the reasons why people should choose T-Mobile rather than purely a free phone,” Gopalan said. “Of course, we’ll be competitive on things like subsidy, but that’s not what we’re leaning in on.”
The top executive also acknowledged that smartphone prices are rising owing to a surge in memory costs. “What we’re seeing is clearly the memory price increases are resulting in higher prices for smartphones across the board,” Gopalan said. He added that the company does not plan to increase its device levels. This means customers will likely have to pay more.
It’s not just T-Mobile
T-Mobile CFO Peter Osvaldik clarified during the earnings call that the company is not completely moving away from device subsidies. Instead, it is focusing on offering customers more overall value rather than relying mainly on free phone promotions.
“The ability for us to attract customers beyond a subsidy-driven promotional environment, that’s the flow of the current, because customers see the totality of the value that they’re getting, inclusive of more and more so the network, the significant reliability, the significant network experience, and (we’re) starting to see a flow of network seekers coming our way,” said Osvaldik.
These comments come after it first warned about its plans to cut back on free phone offers earlier this year. For what it’s worth, T-Mobile isn’t the only network cutting back. Verizon CEO Dan Schulman, in an earnings call in April, said that the company is pulling back on device subsidies. This is as part of plans to reduce spending on promotional offers to drive more robust revenue growth.
Holding phones longer
As more wireless networks cut back their free phone offers, US consumers are reportedly holding onto their devices for longer. A survey from last September found that Americans keep their phone for nearly 2.5 years on average.
As T-Mobile reduces its free phone offers, the company expects a temporary increase in customer churn. It’s also expecting a slower growth in postpaid account additions during Q3 this year. The company said this is largely due to its decision in June to retire several older phone plans and move affected customers to newer plans. Some of which cost more.
“As part of our full-year plan and guidance, we anticipated our Q3 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,” said Osvaldik during the company’s earnings call.
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