David Shapshak
Buying a cellphone is easy. Upgrading to a new phone when your contract expires, isn’t. You can either just go out and buy yourself the latest hot item to hit the shelves, or play the sophisticated marketing game which enticed you to buy your contract in the first place: sign up for another contract as if you were a first-time subscriber.
Given that, on average, handsets cost between R1 000 and R2 700, most people opt for the latter. But why bother to upgrade if there’s nothing wrong with your phone?
On a practical level, the state-of-the-art phone you bought two years ago is a poor relation of the ones you can get today. And let’s not forget the status factor involved in having the latest, most expensive new toy on the market.
Because you got a free handset when you first signed up, you may expect the same treatment when your initial contract expires and its time to exercise your consumer choice.
The networks may want to grow their subscriber base, not re-outfit existing clients, but you try and tell freebie-hungry consumers they have to pay for something they got gratis last time.
The cellular industry has scored an own goal by giving away cellphones at artificially low prices or for free. Subsidising handsets has made the services that bit more expensive as the networks recoup the cost of the handsets.
But now, as one of the waves of initial purchasers’ two-year contracts has passed, both MTN and Vodacom have had to continue this practice to retain their clients.
Vodacom offers its service providers incentives to upgrade their existing clients, including a reconnection bonus (to pay for the reconnection fee) and price support for the handset itself to bring the cost of the phone down. Service providers look at your usage, and depending on how much time you spend yakking away, they may throw something extra into the deal.
Although there are set policies between Vodacom and individual service providers, specific upgrade deals depend on each operator’s policies. MTN also encourages its service providers to retain their existing clients.
In the past, MTN service providers could not afford to retain their clients because the network did not subsidise upgrades. But now the network also provides the subsidies.
Both networks try to reduce the disparity between the handset’s true value (or insurance replacement value) and the upgrade price by bringing it closer to the recommended retail price.
Many consumers believe that they can get an upgrade at the same price as the new subscriber offers being advertised, while staying with their original service provider. If the operator fails to play ball, you can always sign up elsewhere and get the new subscriber deals.
The deterrent to switching service providers is that you’ll have to change your cellphone number, which could be a bit of a wrench after two years together.
Nonetheless, while cellular users expect their phones for free, they fail to realise the costs are recouped in other ways. The costs of calls could be significantly less, industry sources believe, were it not for the desire to replenish networks’ profits lost in the subsidisation schemes.
They say initially laying out more for a phone unit would benefit consumers in the long run, as they would gain from lower tariffs and better facilities. The savings in running costs would more than outweigh the initial purchase cost.
But, while the sun shines, you might as well make hay. If your contract is up, latch on to a new phone through the upgrade scheme – you may not get the chance next time around.