The cost of a BYO mobile phone versus a contract mobile phone

Many users of mobile phones are prone to speak of having ‘got a free phone with my plan’ but the fact that the service provider companies advertise phones as ‘$0 upfront’ rather than ‘free’ is an invitation to canny consumers to try to find out the prices that are really being charged. This market is in a constant state of flux, so never assume that even recent figures are accurate: do you own sums.  This piece is about the sums to do, illustrated with what are now partly historical data: it offers an analysis of what Vodafone was offering its Australian customers on 26–7 October, 2011. However, on 28 October 2011, while this piece was being completed, Vodafone changed some of its plans, so do not presume what is said in the present tense still applies.

Vodafone don’t sell outright many of the phones they offer with the postpaid plans, but here are the ones they do sell as prepaid phones, locked to the Vodafone service as well as offering them on contracts:

Nexus S RRP $299, online $269
Nokia X3-02 RRP $129, online $117 ($199 unlocked at Dick Smith Electronics)
Nokia C2-01 RRP $79, online $71 ($99 in warm silver or $129 in black, unlocked, at Dick Smith Electronics).
Samsung Galaxy Fit RRP $179, online $161

The first lesson here is that it is worth checking what the unlocking fee would be if you decided you wanted to switch to another company: despite these charges, it can still make sense to buy a phone outright in locked form from the service provider, depending on the kind of gamble involved. Vodafone customers who don’t want these four phones would be wise to check at third party retailers to see if unlocked versions of the Vodafone contract phones that they fancy are available there, and at what price.

To find out what the provider is really charging for its phones, you need to find SIM-only plans that offer the same included value and usage charges as a contract that includes a phone. At Vodafone, it appears that:

  • A $20 SIM-only, phone aside, is the same as $29 Cap, so the cost of a ‘$0 upfront’ phone is $9 per month on a 24 month plan, i.e. $216.
  • A $35 SIM-only is the same, phone side, as $49 Cap, so the cost of a ‘$0 upfront’ phone is $14 per month on a 24 month plan, i.e. $336.
  • A $55 SIM-only is the same, phone aside, as $79 Cap, so the cost of a ‘$0 upfront’ phone is $24 per month on a 24 month plan, i.e. $576.

Clearly, it makes sense to go for SIM-only if you only want a cheap phone on a 24 month plan. The Nexus S comes at ‘$0 upfront’ on each of these cap plans, but is only worth getting via a contract in the case of the $29 Cap; in the other three cases, it pays to buy it outright and select the corresponding SIM-only plan.

With 12 month plans, there is an additional monthly fee for the Nexus S and the pricing is much more consistent. This phone adds

  • $15 to a $29 Cap plan, so the cost of the phone is $(15+9)*12 = $288
  • $10 to a $49 Cap plan, so the cost of the phone is $(10+14)*12 = $288
  • $5 to a $59 Cap plan (but there is no SIM-only equivalent)
  • $0 to a $79 Cap plan, so the cost of the phone is $(0+24)*12 = $288

The Nokia X3-02, Nokia C2-01 and Samsung Galaxy Fit are $0 on all 12 month plans, so effectively cost $108 on $29 cap, $168 on a $49 cap and $288 on a $79 cap.

The deals that Vodafone offers on iPhone contracts seem rather more obviously better – at least for Cap plans – than a SIM-only with an unlocked iPhone from an Apple Retailers. Here are the figures for a couple of different iPhones:

iPhone 4S 64GB ($999 from Apple)

  • Not available on a 12 month $29 Cap plan
  • Adds $52 per month to a 12 month $49 Cap plan, so the cost of the phone is $(52+14)*12 = $792
  • Adds $47 per month to a 12 month $59 Cap plan (but there is no equivalent SIM only plan)
  • Adds $42 per month to a 12 month $79 Cap plan, so the cost of the phone is $(42+24)*12 = $792
  • Adds $25 per month to a 24 month $29 Cap plan, so the cost of the phone is $(25+9)*24 = $816
  • Adds $25 to a 24 month $49 Cap plan, so the cost of the phone is $(15+14)*24 = $696
  • Adds $10 to a 24 month $59 Cap plan, (but there is not equivalent SIM-only plan)
  • Adds $5 to a 24 month $79 Cap plan, so the cost of the phone is $(5+24)*24 = $696

iPhone 4 8GBis ($679 from Apple)

  • Not available on a 12 month $29 Cap plan
  • Adds $22 per month to a $49 Cap plan, so the cost of the phone is $(22+14)*12 = $432
  • Add $17 per month to a $59 Cap plan (but there is no equivalent SIM-only plan)
  • Adds $12 per month to a $79 Cap plan, so the cost of the phone is $(12+24)*12 = $432
  • Adds $11 per month to a 24 month $29 plan, so the cost of the phone is $(11+9)*24 = $480
  • Add $0 per month to a 24 month $49 Cap plan, so the cost of the phone is $(0+14)*24 = $336
  • Adds $0 per month to a $59 Cap plan, (but there is no equivalent SIM-only plan)
  • Adds $0 per month to a $79 Cap plan, so the cost of the phone is $(0+24)*24 = $576

With Vodafone’s Infinite plans the only difference between a plan with a ‘$0 upfront’ phone and a SIM-only plan is at the $45 level where the SIM-only plan gets an extra 1GB of data, so it is hard to infer the charge for a ‘$0 upfront’ phone.  With these plans, the Nexus S and the Samsung Galaxy Fit are ‘$0 upfront’, as of course are the far cheaper Nokia C2-01 and Nokia X3-02, so it is only possible to see the price of an iPhone in terms of additional monthly charges for upgrading from any of these. For example:
For an iPhone 4S 64GB, the extra charges on Infinite plans are:

  • $45 12 month:  $57 ($684 over 12 months)
  • $65 12 month:  $52 ($624 over 12 months)
  • $85 12 month: $42 ($504 over 12 months)
  • $100 12 month: $38 ($456 over 12 months)
  • $45 24 month: S25 ($600 over 24 months)
  • $65 24 month: $15 ($360 over 24 months)
  • $85 24 month: $10 ($240 over 24 months)
  • $100 24 month: $0.

For an iPhone 4 8GB, the extra charges on Infinite plans are:

  • $45 12 month:  $27 ($324 over 12 months)
  • $65 12 month:  $22 ($264 over 12 months)
  • $85 12 month: $12 ($144 over 12 months)
  • $100 12 month: $0
  • $45 24 month: S12 ($288 over 24 months)
  • $65 24 month: $2   ($48 over 24 months)
  • $85 24 month: $0
  • $100 24 month: $0.

Given the prices these phones are at an Apple Store ($999 and $679, respectively), it may seem hard to justify buying either of them outright from an Apple retailer to use with a SIM-only Infinite. It would make no sense to ask for an iPhone 4 8GB with a $100 Infinite plan given that the superior iPhone 4S 64GB costs no more.

While the earlier calculations revealed the significant discount on iPhones that is achieved if they are obtained via a Vodafone Cap plan rather than an Apple retailer, the implied discount seems even better on the Infinite plans. I was about to conclude that a $45 Infinite plan was an better deal than a $49 Cap plan for an iPhone users, but when I went back to Vodafone’s website for a final check to make sure there was no area in which the $45 Infinite plan was inferior, the plan had been replaced by the $50 Infinite plan with the monthly add-on cost of an iPhone 4s 64GB reduced to $20 on this plan but cut to $10 on the $49 Cap plan. With the $50 Infinite offering unlimited domestic calls and texts but the $49 Cap offering 1GB more data, it is not obvious which one dominates.

Take care, and, as you do so, keep in mind how fast the price of phones is coming down whether you buy them outright or via a service plan: if you can get by with your existing handset for another six month or a year, it may save you hundreds of dollars.

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