T-Mobile Isn’t Actually Making a Profit off of the $450 Nexus 5

November 8, 2013 - Written By Alexander Maxham

Earlier today, T-Mobile announced that the Nexus 5 would be available to purchase through magenta on November 14th, and hitting stores on November 20th. A lot of us noticed, well those that did the math, that is $100 more than Google is charging for it. Of course everyone is jumping to conclusions “T-Mobile is trying to make a profit” etc. But as CNET is reporting this evening that doesn’t seem to be the entire truth, or even true at all.

CNET is reporting that T-Mobile’s representative informed them that they have to pay full retail price when it purchases the phone from Google’s manufacturing partner, this time it’s LG. Now this raises even more questions. If the full price is $450 for the 16GB version (damn that’s still cheap for a phone), that means Google is subsidizing the Nexus 5, even if it’s just $100 cheaper. CNET says it’s not immediately clear why Google’s is subsidizing it, but it’s actually clear as day. Google is using the same sales model as Amazon. Basically sell hardware cheap, and bank on people using your services. Which is what Google is doing.

T-Mobile is arguing that they have a better deal than Sprint does, and I actually agree. If you were to walk into a T-Mobile store on November 20th, when they hit stores. You could walk out with a Nexus 5 for under $50. While Sprint is technically charging $49.99 for theirs as well (after a $100 mail-in rebate), T-Mobile is charging you $17/month for 24 months to pay it off. So let’s do some math here. If you were to get unlimited everything on T-Mobile, that’s about $70/month plus the $17, which gives you $87 per month as your monthly bill. For the same unlimited everything at Sprint, it’ll cost you $110. And this is before taxes and fees. So to me that appears to be a better deal at T-Mobile. Of course, we should also note, that neither one of these carriers have the best coverage. So you’ll have to go with what works best for you. But if they both offer great coverage in your area, I’d recommend T-Mobile since it’s about $20 cheaper.