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The Best Part About T-Mobile's 'Simple Starter' Plan?

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Here's the fine print: There is no fine print.

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People in Panama are laughing at us.
 
Actually, people in India, Italy, and Indonesia are laughing at us, too, but I have recent firsthand knowledge of Panama. A group of young, phone-toting professionals there laughed out loud when they heard what Americans pay monthly to use their cell phones. (The concept of a heating bill brought down the house, but that's another story.)
 
In Panama, as in much of the world, people buy a phone and then buy prepaid coverage, refilling at need. It costs maybe $20 a month, even if they frequently call internationally.
 
The average monthly cost is about $10 in Germany, India, Indonesia, Italy, and the UK. In the US, it's about $85. Those figures are based on purchasing-power parity, meaning they are adjusted for relative cost of living.
 
In the entire world, only a couple of African nations have costs as high. Canada's come closest, and they're furious about it.

That makes the latest move by T-Mobile US Inc. (NYSE:TMUS) newsworthy. The company just unveiled a $40 plan called "Simple Starter" that includes unlimited talk and text, and data capped at 500 megabytes.
 
So, big deal. Other companies have plans for a few dollars more. But here's the fine print: There's no fine print.
 
The company will alert users if they hit the monthly data maximum, and give them the chance to buy a one-day pass for $5, a week-long pass for $10, or upgrade to the $50 plan. So, no unexpected overage charges, and no automatic slowdown to "throttled" Internet speed.
 
The big deal isn't the cost. It's the simplicity.
 
As plans and contracts get more complex consumers get more anxious. They're afraid to turn on their cellphones abroad for fear of unexpected roaming charges. Afraid to use their phones too much for fear of accidentally exceeding the limits and getting unexpected charges. Afraid to switch providers for fear of yet more extra fees that their existing carrier hasn't thought of yet.
 
Also on Thursday, the company announced it would offer new and existing customers the ability to add coverage for an LTE tablet free through the end of 2014. It also will slash the prices on its LTE tablets, until they match Wi-Fi-only tablet prices. That includes $130 off on the Apple (NASDAQ:AAPL) 4G LTE iPad Air.
 
The company says there's a third piece to this announcement, but it has been postponed until April 14.
 
The iPad deal may make Apple fanatics cheer, but for most consumers the big deal is transparency. In a blog post on his company's site, CEO John Legere makes it clear that he wants to remove "pain point after pain point" of his industry's standards. Or, as he calls it, the "arrogant, out-of-touch US wireless industry."
 
The company made waves late last year by announcing that it was canceling all international roaming charges. Voice calls are a flat $0.20 per minute from more than 100 countries.
 
From the investor's viewpoint, what matters most is whether these actions pay off in the long run for the fourth-ranked US carrier. That is, can T-Mobile gain enough loyal new subscribers to offset the lost opportunities to blindside customers with unexpected fees and charges?
 
In his post, Legere dropped a couple of heavy hints that investors will be pleased at the initial results when the company reports its quarterly earnings on May 14.
 
But pricing and plans are not the sole criteria for choosing a carrier. In the latest ratings from Tom's Guide, T-Mobile came in a close second to Verizon (NYSE:VZ) in the overall ratings. In coverage and quality of service, it was tied for a distant fourth after Verizon, AT&T (NYSE:T) and Aio Wireless. (Aio is owned by AT&T.)  It tops the chart for plans and pricing.

Also see:

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Consumer Interest in Apple's iPhone 6 Has Reached Record Levels: Survey


No positions in stocks mentioned.
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