By Thomas Gryta
T-Mobile USA will make some changes to its recently launched
marketing campaign after Washington State's attorney general said
the advertising of its so-called "no contract" plans was
deceptive.
The wireless carrier, a unit of Deutsche Telekom AG (DTEGY
DTE.XE), agreed to change ads that "promised consumers no annual
contracts while carrying hidden charges for early termination of
phone plans," according to a statement from Attorney General Bob
Ferguson. The company said it is voluntarily making the required
disclosures and changes, and will offer full refunds nationwide to
customers who purchased service and equipment between March 26 and
April 25.
T-Mobile wouldn't disclose what specific changes it will make to
the advertising but said it would comply with the agreement.
Under the court order filed by the attorney general, T-Mobile
will stop "misrepresenting that customers can obtain wireless
service and telephone equipment without restrictions" and more
clearly state details and obligations under its plans in the
advertising. It also will instruct workers to disclose those
obligations and train customer service representatives to "comply
with the settlement."
"While we believe our advertising was truthful and appropriate,
we voluntarily agreed to this arrangement," T-Mobile spokeswoman
Anne Marshall said. T-Mobile will make the required changes in all
of its advertising, she said, but the carrier isn't altering its
marketing message that seeks to highlight differences in its
service structure when compared with larger rivals.
T-Mobile is going against the industry standard by having
customers purchase their own device or use one they already own,
rather than having the phone directly tied to a service contract.
Instead, it is offering plans that essentially allow for
interest-free financing and lower service cost than rivals.
The Washington state attorney general took issue with T-Mobile
advertising its service plans as having no contract or
restrictions. In a statement, the official noted that when a phone
is purchased using a financing plan under T-Mobile, it includes 24
months of payments and a requirement that the customer use T-Mobile
service or pay for the balance on the financing if they cancel
service.
T-Mobile is in the process of merging into MetroPCS
Communications Inc. (PCS), a deal that will make T-Mobile a public
company with the deal's expected close next week.
The No. 4 carrier is trying to turn around its long slide. Last
year, it lost more than two million contract subscribers, while
Verizon Wireless added more than five million such customers.
Along with launching new products, including Apple Inc.'s (AAPL)
iPhone, and overhauling its network, T-Mobile has ramped up its
marketing to criticize rivals like AT&T Inc. (T).
Write to Thomas Gryta at thomas.gryta@dowjones.com
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