Francesco Radicati is a Research Analyst with Informa Telecoms & Media. For more information visit www.informatm.com
Retailers get on handset installment bandwagon
With operators across Europe launching handset installment schemes, it was about time a retailer got in on the act. Enter JUMP, from the UK’s Phones 4U.
JUMP stands for Just Upgrade My Phone – and it lets customers do just that, as often as every six months, if they want to. Similar to O2 Germany’s MyHandy, it splits the service contract from the price of the handset, and divides the handset price by the length of the contract (24 months). When the customer wants a new phone, they simply trade in the old one to Phones 4U, which has promised to pay out at least £100 (€119) for handsets in good working order. The remaining value of the old handset is then added to the price of the new one for the remainder of the contract. Phones 4U is also offering remote data backup and storage for contacts, music, pictures and videos.
The prices can add up quickly: to start with, there’s a surcharge on the phone contract with Phones 4U, which runs to about £3 to £4 per month. And, as stated above, when you upgrade to a new phone, you still have to pay off the remainder of the old phone’s value; the only difference is that you pay it over the remaining length of the contract instead of in one lump sum (and you’re not paying off the entire service contract). To use Phones 4U’s own example, a contract that starts out at £37.99 can jump (pun intended) to £53.74 if you get an iPhone 4S after a year. If you upgrade after six months then you’ll end up paying even more.
Like O2 Lease in the UK, this is a way to offer customers greater flexibility in choosing and replacing smartphones. Handsets have got more expensive as smartphones have become popular, which in turn has led to longer service contracts. But, as Phones 4U and O2 note, customers still want to replace their phones more often than every two years. And on the other side of the coin, operators want to reduce subsidies and get customers thinking of phones as something they have to pay for rather than getting them free with a contract.
That said, JUMP’s big advantage over O2 Lease is the flexibility it offers in choosing mobile providers, service plans and handsets, which plays to Phones 4U’s strengths as a retailer. If the other operators weren’t looking at leasing or installment plans before, they will be now. Otherwise, they risk losing a segment of handset sales to the retailers.