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T-Mobile offers 200MB free data with every iPad

By giving away data each month, T-Mobile makes a compelling case to buy its version of the iPad. That's dangerous for its rivals.

The new iPad family.
James Martin/CNET

T-Mobile showed again that it isn't afraid to dangle something free to win over new customers.

In this case, the carrier is offering 200MB of data each month for each T-Mobile-compatible tablet, regardless of whether you're actually a T-Mobile customer or not. It helps that the announcement comes on the heels of Apple unveiling the new iPad Air and iPad Mini with Retina -- Apple's first tablets made available to the carrier.

T-Mobile also has an "introductory" offer for no money down on its tablets, letting consumers pay in monthly installments. Throw in the new iPad with no up-front cost and free data? That's a compelling offer (The offer is completely free - customers must pay a one-time cost of $10 for the SIM card).

"Everything you can do to make tablets easier and more affordable, we're doing," T-Mobile CEO John Legere said on a conference call on Wednesday.

The company is following an announcement from earlier this month that it would offer free international data roaming and text messages to all of its customers. Both programs kick off November 1.

T-Mobile is using the free data to grab headlines and build buzz around its tablet business, which had been virtually nonexistent, thanks to the lack of an iPad. Truthfully, 200MB of data isn't much for a tablet -- no matter what the T-Mobile executives say. But it's enough to get customers in the door and buying a T-Mobile tablet.

"We expect T-Mobile to do well on the headline pricing of 'free,'" said New Street Research analyst Jonathan Chaplin.

That's bad news for AT&T and Verizon Wireless, which have hanged their growth on the increasing number of connected devices, and largely tablets. Thanks to those carriers' family data plans, more customers are adding tablets and other devices and running off that common bucket of data. By offering free data, T-Mobile is assaulting AT&T and Verizon in one of its keystone businesses.

AT&T and Verizon could see a reduction of net customer additions in the range of 10 percent to 20 percent if T-Mobile were to grab 15 percent of the market for Internet devices next year, according to Chaplin.

Legere said as much, noting he was going after the bigger carriers' highly valued tablet business.

AT&T and Verizon representatives declined to comment, while Sprint wasn't immediately available to respond.

T-Mobile's decision to offer no-money-down plans for tablets isn't quite as revolutionary as the company would have you believe. Both AT&T and Sprint offer the same kind of monthly installment plan for tablets -- AT&T through Next and Sprint through One Up. Verizon offers a 12-month installment plan, but it charges a $2 monthly financing fee.

Sprint offers an attractive plan at $15 a month for 2GB of data.

But T-Mobile stands apart with the 200MB data offer. T-Mobile customers can pay an additional $10 for 500MB of data. (Non-T-Mobile customers have to pay $20).

This isn't the company being altruistic.

As the No. 4 carrier in the US, T-Mobile has had to pull out all the stops to get customers to consider the service. Long plagued by network issues it is only now beginning to overcome, it has to fight a bad reputation. This offer is another way to get consumers into T-Mobile stores and looking at its smartphone offerings.

While T-Mobile plans to incur costs to carry that free data, Andrew Sherrard, a marketing executive with the carrier, said the company hopes to make it up through additional customer growth and by convincing customers to pay up for more data.

"Once they experience it, a lot of people will want to be connected more often," Sherrard told CNET in an interview. "It'll be more transformative than people think."

If Sherrard's right, Verizon and AT&T will need to watch their backs.