T-Mobile Agrees To Change Ads After Washington State Settlement

   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 [e-mail]

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