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How to hack T-Mobile’s breakup plan and save hundreds on an iPhone

By Matthew Taylor • 8:00 am, April 30, 2014

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Photo: Jim Merithew/Cult of Mac

There’s a reason T-Mobile’s offer to pay off new customers’ early termination fees sounds too good to be true. In certain cases, it’s a rotten deal compared to just paying the fee yourself.

However, with a little hackery, you can flip T-Mobile’s deal from bad to fantastic — and save hundreds on a new iPhone (or any smartphone).

The devil in the details

As one would suspect, the key lies in the fine print of the deal offered by T-Mobile (and recently matched by Sprint ). The incoming customer must trade in a phone in working condition and buy a new phone they might not need.

If you’re happy with your phone and have already paid off more than 50 percent of its cost, why trade it in? Take, for example, the case of a Verizon customer who purchased an iPhone 5s 64GB at the subsidized/upgrade price and added plus AppleCare+ to protect the investment. The customer paid $399 down plus approximately $80 in tax plus $99 for AppleCare+. or about $578 up front. The remaining $450 of the device’s full retail cost is baked into Verizon’s 24-month contract, at a subsidy of $18.75 per month. Now, four months later, the customer wants to switch to T-Mobile and is faced with an early termination fee of $310 (the original $350 fee has dropped by $10 per month).

In this scenario, which is a better deal? Simply paying the early termination fee, walking away from Verizon with the iPhone 5s in hand and popping in a T-Mobile SIM card? Or taking up T-Mobile on its offer to pay the fee and trading in the 5s?

By a factor of many hundreds of dollars, the better deal is to just pay the fee if you really want to switch and you’re not willing to deploy the hack I’ll outline below. While early termination fees are often viewed as big and scary, the reality is that most of the penalty paid represents the unpaid cost of the phone — more or less (depending on how many months remain in the contract) what the customer would have paid had she purchased the phone at full retail price.

Let’s examine the first scenario — paying off the early termination fee yourself and switching from Verizon to T-Mobile or Sprint. Four months into the Verizon contract, the cost of the phone to you would be your upfront $578 + $310 ETF + the 4 months of subsidy you already paid for as part of your plan, $18.75 x 4 = $75, thus, your total cost for the iPhone would be $963. Amazingly, in this scenario, you actually paid a little less than you would have had you purchased the exact same phone at full retail (roughly $1,028 including tax and AppleCare+).

How can that be? While Verizon is subsidizing $450, the initial fee for breaking your contract is only $350; it takes almost a year before the $10 per month drop in the early termination fee catches up with the $18.75 monthly subsidy.

Now let’s imagine you take T-Mobile’s offer to let them pay off the early termination fee, which requires you to trade in a phone and buy a new one. (Sprint’s offer, available through May 8, appears to work the same way.) T-Mobile would hand you a measly $300 for your shiny, four-month-old iPhone 5s with AppleCare+ that you paid $653 for (upfront costs plus four months of Verizon subsidy payments). Assuming you bought the exact same phone from T-Mobile and purchased AppleCare+ again, you’d now owe $728 after deducting the $300 you received for the trade-in.

The bottom line in these scenarios: Pay Verizon’s early termination fee and you actually save a little money compared to paying full retail for a new phone. Take T-Mobile’s deal while trading in your current phone and you lose $353 of accrued value.

Certainly there are some scenarios in which it makes sense to hand in your current phone and take the early termination fee reimbursement offer. For example, if you’re unhappy with your current phone and it’s not worth much. However, I suspect the following holds true in most cases: If you are nearer to the start than to the end of a two-year contract and you’re happy with your phone but want to switch to T-Mobile, it’s better to pay the early termination fee yourself and bring your own device (assuming it’s compatible with T-Mo) than to accept the Un-Carrier’s breakup offer … unless you want to deploy some hackery! The same holds true if you’re switching to Sprint, but chances are lower that you’ll be able to activate your current device on Sprint’s network than on T-Mo’s.

Hack T-Mobile’s offer to make it work for you

Here’s how to flip that bad deal into a good one. T-Mobile does not force you to trade in the phone you currently use under its early termination fee reimbursement offer — you just need to hand over a working phone. Go on craigslist, buy the least-expensive flip phone you can find that’s compatible with your current carrier (you should be able to find something for between $5 and $30), then trade that in while retaining your smartphone. Then, assuming you have no use whatsoever for a new phone, buy T-Mobile’s least-expensive flip phone (currently the Alcatel 768 for $72 ) and sell it on Craigslist or eBay for at least $20. Thus, you’ll be spending about $82, but receiving an early termination fee reimbursement that pays off your existing phone.

Using the same example of a Verizon iPhone 5s 64GB owner who is four months into the contract, the net benefit would seem to be $228: a $310 early termination fee reimbursement minus $82 in costs. However, because the subsidized value of the iPhone that’s not been paid off to date is $375 at full retail, using this method results in a $292 net benefit.

If you’re happy with your current phone and want to switch to a Sprint Framily plan, this hack may not be as effective. So far as I know, once an iPhone is activated on another network, Sprint is either unwilling or unable to activate it on their network. Furthermore, current-model iPhones that work with AT&T, T-Mobile and Verizon are not fully compatible with Sprint’s LTE network bands .

Since you probably can’t bring your current phone with you, you’ll have to buy a new phone. In that case, your best bet is to sell your current phone for maximum value on craigslist or eBay, buy a low-end flip phone compatible with your current carrier, and trade that in when you move to Sprint and take advantage of the early termination fee reimbursement. Note that Sprint’s deal requires you to trade in your “current device” — but who’s to say the cheap flip phone you’re trading in isn’t your current device?

How to Save $368 on Your Next iPhone

If you’re in the market for a new iPhone and eligible for upgrade pricing with one of the major carriers, this hack gets even better. Given that there’s a $100 difference between the amount Verizon subsidizes ($450) and their early termination fee ($350), and this gap-in-your-favor decreases over time, the biggest upside you can gain using the hack is if you deploy it at the start of your contract.

If you do so, you’ll save a whopping $368 on a new iPhone. That factors in the net $82 cost of buying the used flip phone you’ll trade in as well as buying the Alcatel 768 or other cheapo phone you’ll sell. That means you could tomorrow buy a 64GB iPhone 5S for a net total cost of $660 (including taxes and AppleCare+) instead of $1,028. Wow! Let’s hope this still works in September when the iPhone 6 presumably launches.

Caveats and special cases

The math probably works out similarly for other smartphones, but Verizon iPhones are probably your best bet, because they’re unlocked out of the box. The Verizon 5s and 5c are fully compatible with T-Mobile’s LTE network (the old iPhone 5 apparently is not). Last I checked, AT&T iPhones are locked out of the box and you must ask AT&T to unlock them, which I’ve never tried (perhaps readers can inform us in the comments about AT&T’s current unlocking policies and whether this is doable on Day 1 of a new contract).

Whatever you do, stay away from Sprint iPhones. They’re locked out of the box, and when I asked Sprint to unlock my iPhone 5 for domestic use, the carrier refused. I’ve never heard of any workable method of unlocking a Sprint iPhone for use on T-Mobile short of using a Gevey SIM. In any case, it appears none of Sprint’s iPhones are compatible with T-Mo’s LTE network.

What should you do if you’re eligible for upgrade pricing but have a few months left on your contract with a carrier such as Sprint? In that case, switch from Sprint to Verizon. If there’s an early termination fee, pay it yourself (assuming it’s small because you only have a few months left). Then deploy the hack!

Or wait for your contract to end, and hope T-Mobile’s maverick CEO John Legere doesn’t read this article and change the fine print of his company’s breakup offer.

Don’t forget, you must port in a postpaid, on-contract phone number to take advantage of the ETF offer. If you’re on one of the smaller prepaid carriers, you’ll need to port your number twice — first to Verizon, for example, then to T-Mobile.

P.S. Anyone want to buy a new, still-in-the-box Alcatel 768?

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