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Buying a smartphone outright VS buying on a 24 Month Contract

  • Buying on contract is really not the only option
  • iPhone 5 is a hard pill to swallow; Android handsets much cheaper
  • Amaysim plans cannot be beat for value
Written by Adam Wajnberg
16/01/2013

In the past, buying a mobile phone was a pretty locked-in affair. The manufacturers of handsets were in cahoots with the network operators, and owned no retail presence- it wasn’t like you could easily go and buy a Nokia 5110 from the Nokia Shoppe (we assume it would be spelled this way, given Nokia’s old-timey credentials). You had to procure your handset from your provider, over a long contract. And when the contract was over, you weren’t so much obliged to buy a new phone as you were compelled to by the market – handsets became a carrot for network providers to use to retain customers. Why not sign up for two more years if it means a free gadget?

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nokia 8800

 

OMG shiny...and only $1300!

 

But like many consumer electronic industries, there reaches a flashpoint where a secondary market takes hold for the large consumer portion that’s happy with their hardware and just wants a simple monthly plan. This gave rise to Mobile Virtual Network Operators (MVNOs), who rent wholesale space off the network owners and offer cheap, simple plans to complement an existing handset.

The X Factor in all of this is the iPhone. Apple has its own highly lucrative and attractive retail presence, and the iPhone created a watershed in how people see smartphones. Until the 2008 release of the iPhone 3G in Australia, smartphones were a high-ticket item, rarely available without a contract (unless one was purchasing their handset from Hong Kong or through eBay) and usually only a business tool. The market was otherwise focused on expensive feature phones like the Motorola RAZR, the Nokia 8800 and the Sony Ericsson w810. Those were for contracts; everyone else bought cheap Nokias and Samsung phones for $50 in a prepaid pack, or used a handset passed on to them.

too many phones

6 for a buck, or free with a 600mL Coke

Flash Forward – not only are dumbphones/featurephones now dirt cheap and cluttering up supermarket shelves across the country, but even smartphones are being bundled into cheap-as-chips prepaid packs. Network operators (Telstra, Optus and Vodafone) don’t even bother locking some handsets to a network, and usually unlock most phones for free otherwise. Moreover, with the rise of online shopping and the view that smartphones are more mini computers than big time phones, people are willing to buy these outright, whether it be from a retail store (Apple) or from many grey-market ‘drop shippers’ like Kogan and Mobicity.com.au (and even Dodo). The term grey-market is used because strictly speaking, these phones are not checked by Australian authorities for sale in Australia; but it’s a hard law to enforce given that doing so would expose Australia’s technology industry as being somewhat protected and anti-competitive.

So people are buying ever-more sophisticated smartphones for a song, or second hand, or online – and even the big $1000 handsets are sometimes cheaper to buy outright and pair with a cheap, simple plan from an MVNO.

The response from the actual network owners has been to lower the price on some cap plans (usually bundled with a new handset), but also jack up the call price and otherwise chip away the actual cap value. But even that’s slowly being challenged, as more and more people (like yourself, reading this article!) get wise to how this little economy works. So there is a balance where some cap plan contracts with a new handset are just cheap enough and good value enough to remind people that buying an $800 handset over 24 months is a lot easier than paying that cash outright.

For this comparison, we will take the iPhone 5 16GB, Samsung Galaxy S3, HTC One X and Nokia Lumia 920 for comparison, as the most popular and ‘solid’ phones across the three major smartphone ecosystems (iOS, Android and Windows Phone).

For the purposes of this comparison, all $-99 prices will be rounded up, as will per unit prices on calls (ie. ’99 cents a minute’ will be noted as ‘$1 a minute). We feel that making price tags longer helps dull the blunt information that people need, and we want to be blunt :D

iPhone 5 16GB

iphone 5


Outright from Apple - $800

Amaysim $40 unlimited plan (1300 302 942) – free calls to all Australian standard numbers (landline, mobile, 13/1300/1800), all text to all networks, all picture messaging – Free, with 4GB of data (3G, Optus network).

Though the Amaysim plan has no long term obligation, let’s compare Apples to Apples; Over a 24 month period, the effective cost would be $40 a month, plus $800/24; $33. Effectively, this plan would give you the latest phone, outright, with a plan  that includes everything one could expect from a company with a growing reputation for fairness, value and customer service. Not happy? You can easily walk away.

24 month contract from Optus - $50 a month + $13 handset repayment ($63 a month)

For $10 less per month, you get only $500 worth of call value (with calls at 90 cents per minute), free SMS and 1GB of data, More than enough for many people; but there’s always that worry that if you’re not careful, you could go over your cap value and get hit with a big bill. 13/1300/1800 numbers are included as part of your call plan, so there’s that. But still…a 1 hour drama calling a 1300 number to discuss car insurance costs $54 of your $500 call credit.

So the advantage when buying on contract: $240 cheaper overall, with 4G speeds and the ease of paying off a bit at a time. Also; retail Optus stores for bill problems and the like.

The advantages when buying outright – you’re not locked into anything, Amaysim is easier to deal with than a big company like Optus, and there’s little need to ‘deal’ with anything – the plan is straightforward and easy, with no complex conditions. And of course, 4GB of data.

Samsung Galaxy S3 16GB (4G capable)

samsung galaxy s2

 

Outright from Kogan - $560

With Amaysim $40 Unlimited Plan – effectively $63/month over 24 months

On contract with Optus - $63 a month, $500 value/1GB data

No contest at all. Buy it outright and enjoy the best Android phone on the market without the spectre of a huge commitment or worse, huge excess usage bill). To get a halfway decent plan with Optus, you’d need to spend $100 a month, for unlimited call, text and 3GB of data. Amaysim still gives you more (at slower data speeds, but still not THAT slow).

HTC One X+ 16GB (3G capable)

htc one x

 

Outright from Mobicity - $660

Unfortunately, finding a 4G version of the HTC One X+ isn’t easy in the grey market; in fact, the 4G version is even hard to come by on contract. So we’ll compare the 3G version with a Vodafone plan, as Vodafone won’t have 4G until April 2013.

On the Amaysim $40 Unlimited Plan, the effective monthly price over 24 months for the HTC One X+ is $67.

On Vodafone’s $60 plan (Call 1300 106 571), the phone is free and comes with $700 value, 1GB of data, free calls to Vodafone and 3, free txt to all networks, plus some other limited time goodies (first 2 months free, bonus data, etc). Their $80 plan has free calls, free txt and $80 for international calls (and 13/1300/1800 numbers, which Vodafone doesn’t include, to their discredit).

This is a bit harder to call. Honestly, the One X is due for a big refresh, even as it is the equal of the Samsung rival and with a much nicer design to boot. Vodafone is almost that rare offer that’s as good as buying outright…but they don’t include 13/18 numbers in their cap plans. That’s simply unforgivable – even Telstra is starting to do that. With their network woes (which are frankly getting much better) and general malaise, they can’t afford to play those sorts of games.

Nokia Lumia 920 32GB (4G capable)

 

nokia lumia 920


Outright via Kogan – a very surprising $680

With the Amaysim $40 unlimited plan – effectively $68/month

On contract with Telstra (the only provider offering the 920) - $65/month with $600 value, free text and 1GB of data

The 920 is a beastly phone with huge specs and special features. It’s Nokia and Microsoft’s flagship for Windows Phone 8, which shows promise in taking the fight to iOS and Android.

But still. The track record when it comes to both firms in the smartphone game is still not great, which is probably why this phone is so cheap outright. The only advantage in buying on a plan is Telstra’s 4G network, but soon enough Amaysim and other cheap MVNOs will likely get access to Optus’ 4G network, which is growing in strength.

Conclusion

For top of the line phones, most people will still buy on contract, unless better financing options become available for the $500+ mini computers. But right now, it makes sense to buy outright in the long run – a LOT of sense. If you can spare the cash right now, there’s no reason not to do it this way.

 

For more on the best deals and handsets, call us on 1300 106 571!

 

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