The two-year phone contract: con or bargain?

11th Apr 2007 | 23:00

The two-year phone contract: con or bargain?

Why the long-term contract isn't for everyone

The introduction of Orange's lengthy 24-month contracts could scare customers away and help break the relationship between mobile dealers and the public, analysts warned today.

Orange 's nine new tariffs each offer a mixture of hundreds of free texts, free minutes and free internet use - up to 50 per cent more than 12- or 18-month contract packages, according to Orange. But the offers lock the customer into a two-year deal which doesn't include a handset upgrade within that period, a move many consider contrary to the UK mobile industry's largely handset-led market.

"The terms of 18-month contracts are very good for customers," says Elsa Lion, senior analyst at Ovum . "They get the latest handsets, all highly subsidised. Orange's 24-month plan in the UK seems like the next evolution of the contract - but such a long contract will put the fear of God into most customers."

Most contract customers upgrade their mobiles every 12 - 18 months, with these new contracts, they won't be upgrading for two years. In the UK, a new handset is the most important factor for the customer, according to Lion. "A customer will choose a new phone by coming in saying 'I want this handset. What offer can you give me?'"

Not for everyone

Orange is keen to point out that the two-year contract won't be for everyone. "This kind of deal would appeal to someone who's trying to budget," an Orange spokesperson told Tech.co.uk.

"Our tariff plans still allow for people who want to upgrade to the latest handset every year. But people who opt for the 24-month plan will care more about value."

But can concerns about the 24-month contract be dismissed so diplomatically? According to Lion, 18-month contracts now make up a significant proportion of new mobile subscriptions tempting customers with an impressive array of features and extras; 24-month contracts will look even more tempting.

"Over time, 18-month contracts have represented a large proportion of sales. It's a substantial volume - it's so substantial its affecting the dealers," explains Lion.

Trade magazine Mobile News is reporting that long-term contracts - 18 months plus - strain relations between customers and retailers. With Orange's two-year deal only available online, is this the end of the customer/retailer relationship?

"If the customer has already been involved with the operator, they'll come back - the shop is still there to answer questions and help in other ways," says Orange. "If anything, the 24-month contracts will strengthen shop/customer relations."

A good thing:

  • Orange is boasting that its 24-month contracts come with over 50 per cent more extras than shorter contracts; great for those who talk and text a lot, but don't want huge bills.
  • Get the latest handset that you may not have been able to afford on a 12 or 18 month contract.
  • Relax: with two years on your contract, you won't have to worry about upgrading or checking for better tariffs.

A bad thing:

  • No phone upgrades. If it breaks down during the two years, unless it's under warranty, don't go expecting a free upgrade.
  • Watch your phone age. Unless you don't care about having new handsets, your phone will age quickly in the fast-evolving world of mobile phone technology.
  • Two years is a long time to be locked into a contract and you'll miss any interesting offers than come along in the meantime.
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