How to get a smart deal on your smartphone

As the iPhone 4 becomes Britain’s most popular phone, long-term contracts have been ushered in to allow customers to spread the cost of this pricey HANDSET. HOWEVER, when young people need flexible and affordable options,  shorter contracts and cheaper smartphones shouldn’t be dismissed

At the end of last year, a Nielson study estimated that around 36% of young Britons owned a smartphone.

Surely that figure has grown this past six months. Most young people I know couldn’t live without their iPhones alone, allowing them to use the internet on the go, download over 350,000 handy applications (or “apps”) and listen to music via iTunes, amongst many other things. “If you don’t have an iPhone”, coos Apple’s most recent advertisement, “well, you don’t have an iPhone.” 

Yea, and you probably still use a mangle to dry your clothes.

The latest Apple ad

 

In fact, the chief executive of Vodafone goes even further. Vittorio Colao believes if your phone isn’t a smartphone, it must be, well, a “dumb” phone. Charming.

Describing the UK as “smartphone land”, he claimed models which only call and text “will no longer exist” in three to four years time in this country. This will render prehistoric phones like mine, which doesn’t even connect to the internet properly, obsolete. Coincidentally, Colao made these comments just as the company was announcing its own rival to the iPhone – the Vodafone Smart.

Meanwhile Nokia, the Finnish communications giant, has lagged behind competitors in smartphone territory and its fortunes have plummeted as a result. The new chief executive Stephen Elop believes the survival of the company rests entirely on creating better smartphones and bringing them to market quicker.

Earlier this year he said “the first iPhone shipped in 2007, and we still don’t have a product that is close to their experience…unbelievable”.

So, the iPhone has become the benchmark for all mobiles. But how much does it actually cost?

The Apple website is currently selling the 16GB version of iPhone 4 for £510, including VAT.

That is roughly £60 more than what the average Briton earns in a week. The iPhone is the most prestigious high-end smartphone currently on the market. And yet it was also the most popular mobile in the UK in April, according to recent research from uSwitch , and it is gaining in popularity amongst low-income workers, students and young people generally. So how can they afford it?

Well, some of them are really straining their budgets. A Yougov poll recently found around one in five iPhone owners admit their main bank account is always overdrawn (double the national average for being in the red) and just under half of them earn less than £20,000 a year. When most ‘apps’ sell for 59p a pop, the costs quickly add up. 

But another reason is that many people aren’t making this expensive purchase from the Apple store. Vodafone, Orange, T-Mobile and others provide the must-have product for free – as long as you sign up to a long term contract.

iphone-4-uk-price5

Many young people don’t have enough money in their account to pay half a grand plus contract fees for a fancy new phone. So this has become an attractive offer and a canny way for providers to lure in new customers. Pay no upfront cost, just an affordable monthly fee for two years.

But you’re spreading the cost, not paying any less money in the long term. The cheapest deal recommended by Moneysupermarket.com this week* is a 24 month contract at £37.50 from Vodaphone (available at mobiles.co.uk). This works out at £900 over two years – £390 more than the cost of the iPhone.

Companies argue they can only subsidise free handsets and keep monthly fees low if they keep customers locked into a longer contract to claw their costs back over time. As part of this trend, providers were even offering 36 month contracts recently, with as many as 3000 deals like this on the market at the beginning of the year.

But EU legislation called a halt to this and brought back more traditional 12 month deals to the market. This is good news if you don’t want to be tied to a contract and phone for very long. But to compensate for this, average monthly fees have risen and providers now can’t offer flash handsets for free on shorter contracts. Moreover, the cheaper and shorter the contract is, the less monthly allowance there is for texts, minutes and MB data.

However, some of these shorter contracts are worth investigating if you are prepared to pay an upfront cost and compromise on the bundle you get. The cheapest deal on moneysupermarket.com for a 12 month contract this week is to pay £299 up front plus a £35.00 monthly fee with Vodafone (available at Phones 4 U).* This works out at £719 in total for the iPhone 4 – £181 cheaper than the best two year deal currently on the market. Of course, this saving is cancelled out if you intend to find a similar contract in a year’s time. But who knows where you will be then and what you’ll want from your phone?

Although short-term packages can be less generous, it can be a good idea to start with a lighter contract and switch up to a more substantial deal if you need it. You can really squeeze all the value out of your contract, so long as you are careful not to exceed your limits.

iPhone 5 could well hit the UK by the end of 2011 and contracts for older models will almost certainly drop in price (at the moment, contracts for the iPhone 3GS are, on average, £10 cheaper than for the newer iPhone 4). If you aren’t preoccupied with having the latest product, there are definitely cheaper deals to be found; it could be impossible to keep up with the zeitgeist and get the best possible value smartphone in the long term.

If you’re prepared to shop around and look beyond the iPhone, HTC and Samsung are just two other high quality brands in an increasingly competitive market. For instance, Orange offers a 24-month contract on an HTC Desire phone at £25 (that is £600 in total), allowing 300 mins, 500 MB data and unlimited texts (it is £19.27 with cashback at onestopphoneshop.co.uk).

And fair play to Mr Colao at Vodafone – he aims to make smartphones cheaper than £100 within the next two years. The Vodafone Smart is expected to retail at £80 when it goes on sale this summer. Thanks in part to China’s furiously quick production of cheap smartphones, these devices are becoming ever more affordable and it isn’t uncommon to find contracts on budget phones for £15 a month or less. I recommend the Which? Mobile website to find out more information about what these can offer.

vodafone_smart

If there will be no alternative to the smartphone in a few years, at least there’ll be some bargain options for those who can’t afford to jump on the Apple cart. Until then, I’ll make the most of the time I have left with my Nokia brick. Sniff.

*Prices correct as of 24th May 2011

Figure out what you want from your phone.

First thing to do when deciding on mobile phone deals is to look at your previous bills and examine how you used your phone (assuming you were on a contract). Did you use up your texts or minutes? Go over or even fall short? If you are obsessed with your phone and constantly use it to browse the internet, you will probably need a longer contract that can give you a generous or unlimited data allowance.

Consider the merits of different long term contracts. Comparison websites can help you find the right deal.

Compare and contrast what the 12 month, 18 month and 24 month contracts can offer you. Most mobile phone providers offer free smartphones on long-term contracts (long-term is generally considered 18 months and over) as most people can’t afford the upfront cost of smartphones (£600 or over) and it locks customers into a deal that prohibits switching to rival providers too frequently. As a rule, longer contracts tend to have lavish allowances, but 2 years is a lifetime in the world of technology and consider whether you will want the same phone and contract for that long.

Read the price plan details on internet usage to get an approximation of what the MB allows you.

Vodafone says 500MB gives you “enough to send and receive around 5,000 emails or log into Facebook up to 10,500 times. Or, you might choose to view 100 five-minute YouTube clips – or roughly 1,600 standard web pages.” Note that video content is at a premium because it uses up more data. Before you check out the top 100 laughing baby videos on YouTube, bear this in mind.

Divide the monthly totals for internet MB, minutes and texts by 30 to get a rough daily amount allowed for each area.

The monthly totals obviously sound like a generous amount but if you calculate how much you are given in each area every day, it all comes out in the wash. You have to make sure your contract is giving you the right amount in the right areas.

For instance, if you pay £20 a month for 200 mins and 250MB internet usage a month, the offer boils down to around 6 minutes call-time a day and allows you roughly 25 website views and the possibility of sending and receiving 80 – 85 emails a day. You can also log into Facebook roughly 170 times, but I would be seriously worried if you did.

Keep within your limits or be prepared to upgrade/switch.

It sounds obvious, but you can easily surpass the limits on your contract and add pounds to your bills. If you’re really committed to a bargain deal, make notes on how much you text and phone during your contract and be prepared to upgrade or switch if you need to.

Remember to switch to WIFI where possible and save your data usage.

A final but vital point for all you internet junkies; make sure you switch the settings on your phone to take advantage of free WIFI and avoid eating up vital MB usage. You can find your nearest hotspots at http://www.myhotspots.co.uk/.

Coming soon – the murky the world of mobile contracts.

Get in touch – ionabain@hotmail.com

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  1. Pingback: Mobiles follow-up: do NOT buy a new smartphone without reading this! | Iona's Young Money Blog

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