I am not an industry expert, but it seems like a lifetime value play: even if a customer only stays with T-Mobile for one contract term @ 2 years, and assume the cost per month is $50, the total value gained would be the 24 * $50 = $1,200. No matter how much it costs for early termination of another contract, there's no way it matches $1,200 (or maybe for a VERY VERY select set of customers.)

Then, assuming people warm up to T-Mobile and say "hey - this is a good company!" , then you lock them in longer.

The cost of paying for an early termination fee could be considered equivalent to a Marketing and/or Distribution fixed cost.

Also consider the margin costs of cell service are almost non-existent. The overhead is covering huge expenses like towers and wireless spectrum, or leasing them from another major player.

After that, you just want as many people on your network as possible so long as they don't largely degrade the service for each other. And if you dominate a market you don't even care about that part because your customers have no choice.

They also require you to give them your old phone, so presumably T-Mobile will be getting some money out of re-selling your old phone. For most smartphones that's at least a couple hundred dollars.