T-Mobile confirmed that it does not make a profit on the phone, suggesting that Google helps out with a subsidy when purchased at Google Play.
No, T-Mobile isn’t hosing customers who buy its Nexus 5.
T-Mobile on Friday said it would offer the Nexus 5 starting November 14 with a down payment of $42 and 24 monthly payments of $17. Add that up, and you get $450, which happens to be $100 more than what Google is charging for the phone at its Google Play store.
The natural assumption, given this is a Google phone, is that T-Mobile is somehow generating a tidy profit on the highly coveted device. But that’s not so, says T-Mobile. A representative confirmed to CNET that it pays full retail price when it purchases the phone from Google’s manufacturing partner, LG.
CNET contacted Google about the pricing structure of the Nexus 5, and we’ll update the story when the company responds.
The difference in pricing does suggest Google is offering a subsidy for the Nexus 5, giving customers who buy directly from Google a break on the device.
It isn’t immediately clear why Google would subsidize the phone, as it doesn’t make up the loss through service fees. It’s possible Google may want to drive more traffic into Google Play, turning it into a more mainstream distribution outlet for its products.
The Nexus 5 certainly has its fans. It’s won rave reviews, with CNET editor Lynn La praising the “excellent price” and calling it “the best Nexus phone by far.”
Indeed, many have wondered how Google and LG managed to pack in so many high-end specifications while keeping the full, unlocked price at a reasonable level. An unlocked iPhone, for instance, will start at $650, with only contracts and subsidies bringing it down to $200.
T-Mobile, meanwhile, argues it offers a better deal on an upfront basis. Rather than fork over several hundred dollars at once, T-Mobile customers can pay a small fee at the beginning and pay the rest off in installments, even if the total cost is $100 more than at Google Play.
Sprint began selling the Nexus 5 for $50 with a two-year contract. Like T-Mobile, it lists the “regular price” as $450.
Here's why T-Mobile's Nexus 5 is $100 more than at Google Play