T-Mobile Will Pay Early-Termination Fees If Customers Switch Services: Is There A Catch?

T-Mobile has certainly upped its game recently. At this week's Consumer Electronics Show in Las Vegas, T-Mobile's CEO John Legere announced that the mobile phone carrier will pay for any early-termination fees if customers make the switch from Verizon, Sprint, or AT&T. T-Mobile's so-called "Un-Carrier" strategy gives people a "get out of jail free" card, Legere said. T-Mobile will also prepare a "breakup letter" to send to the previous cellphone carrier. (Because that will totally show them.)

So what's the catch?

Well, here's how it works: You trade in your old phone for a credit worth up to $300, pick a new T-Mobile device, and pay for the new phone monthly. Once T-Mobile verifies your old cellphone carrier contract by using your latest bill, it'll give you a debit card worth up to $350 for each device. Altogether, T-Mobile will fork over $650 per line for up to five lines. Not too shabby, especially considering that T-Mobile nixed its two-year contracts, gives customers the ability to upgrade twice a year, and trashed roaming fees.

But how can T-Mobile afford all this?

T-Mobile has already attracted more than 1.6 million new customers this quarter. Chief Financial Officer Braxton Carter told CNET that he doesn't expect the changes to affect T-Mobile's revenue stream all that much. Since many potential customers are already deep into their current plans, Carter estimates the company would probably be paying about $150 per line, not $350. And even if T-Mobile sees a drop in the short-term, Carter is convinced that the influx of new customers will more than make up for it in the long run. Plus, T-Mobile will be collecting old phones to refurbish and sell them.

Is it worth it to switch?

T-Mobile has the fastest wireless network in the nation — but that's according to T-Mobile execs. So how does T-Mobile's service really stack up against its competitors'? Little-known Consumer Cellular and U.S. Cellular actually got the top marks on Consumer Reports National Research Center's annual ranking. Among the four major networks, Verizon outscored both T-Mobile and AT&T — who received almost identical middling marks — and Sprint was ranked worst.

Earlier in the month, AT&T announced a plan to offer any existing T-Mobile customers a $200 credit per phone line and a smartphone trade-in worth up to $250. But T-Mobile definitely upped the ante.

If T-Mobile's plan backfires, customers will probably be able to target Legere, who is desperately trying to be a tech bad-ass. He was even kicked out of an AT&T CES party featuring Macklemore. Ironically, his tweet about it got so many retweets that AT&T actually sponsored it on Twitter.

The best part?

T-Mobile's new features may force other companies to implement similar strategies, which can only benefit the consumer when looking for cellphone deals.

“We are either going to take over this whole industry, or these bastards will change and we’ll still be wildly successful,” Legere said. “I’m going to love watching the peckers scream.”

Even though T-Mobile may never become cool, the deal seems surprisingly promising.

Image: Getty