T-Mobile gets rid of contracts for cellphones

NEW YORK — T-Mobile USA, the struggling No. 4 cellphone company, is ditching plans centered on familiar two-year contracts in favor of selling phones on installment plans.

In practice, the phone-buying experience is not that much different from before. For instance, someone who wants a Samsung Galaxy S III would pay $70 upfront and then $90 per month for unlimited calling, text and data. That monthly fee includes $20 to pay off the cost of the phone over two years.

But by separating the cost of the phone from the service, T-Mobile is making its plans and upgrade options easier to understand. When the phone is paid off, the $20 fee in that example disappears.

The company plans to lay out the rationale for the new plans at a New York event Tuesday.