Australians Have Worked Out Contract Phones Are Bad Value

Here at Lifehacker, we've long advocated the view that buying a phone on a contract is a bad idea — an outright buy and a prepaid or month-to-month contract is better value and gives you more flexibility. That approach is becoming more common: new statistics from Telsyste suggest that less than half the phones sold in Australia in 2013 were purchased as part of a long-term contract.

Phone picture from Shutterstock

Telsyte's Australian Smartphone Market Study found that in 2013 that only 43 per cent of Australians over 16 had acquired their phone via a contract. In 2012, that figure was 57 per cent.

That doesn't mean everyone is paying for a brand-new device. According to the study, 30 per cent of buyers acquired new devices, while the other 27 per cent either got a hand-me-down, a gift or a company phone. (BYOD isn't yet universal, it seems).

Have your own smartphone but aren't sure which prepaid plan to choose? Check out our guide to the single best-value prepaid plan on each network.

People who are acquiring on contract are also being more frugal. Telsyte's research found that 56 per cent of people who were on a contract weren't paying any additional fees for their handset.

Telsyte's market share figures also place Android in first place, with a little over 50 per cent. Apple's iOS was second with 42 per cent, leaving Microsoft, BlackBerry, Symbian and everyone else fighting for the crumbs.


Comments

    Do those stats say what percentage of those off-contract were actually corporate purchases?

    Seems to me that in Aus it's better to buy on-contract. $70-80 per month for plan only, plus an inflated $700-900 for a phone? Or just $70-80 for the contract bundle.

    No one is buying Nexus devices, and apart from unobtainable Google-edition phones these are the only good-value outright phones.

      Yeah I did the maths for Telstra, and it was definitely cheaper to go on a plan than it was to buy and go on a BYO.

        +1 Especially if you think you will change your phone within 12 months of your 2 year contract. All you have to do on telstra is pay out the remaining handset repayments and walk out the door with a new phone. Not all carriers allow that.

        Sure the sticker price on prepaid is tempting, but you don't get a phone with that. Once you do the maths, prepaid is the same price or in some circumstances more expensive than having a contract.

          I'd say that in some cases, yes, but not necessarily all. it all depends on what phone you choose and how many discounts you get on your phone. I've done the maths (with telstra with nexus 5), and I'm better off on prepaid;
          Min telstra plan is $69 per month for 24 months, $600 including calls and 1GB data
          prepaid encore is $40 per month with $500 included calls (free after 6pm) and 600MB data, with the option to spend the $40 credit on more data (1GB. extra) or even apps, books, music on the google play store.
          on prepaid with the nexus 5 outright itll take about 13 months until you recoup the cost on your handset and from then on, you're close to $300 in front at the end of 24 months.
          if you can salary sacrifice your handsets or get tourist refund scheme to get gst off the phone, the better you're off.
          that said, I've only done the maths with telstra (no option for me). but goes to show that you need to do your research.

          Last edited 14/01/14 1:33 pm

            When my contract with 3 ended, not wanting to go with Vodaphone, I ended up getting a SIM with my ISP provider (using Optus network) and I bought a new unlocked phone. I get about $450 calls, $1000 calls to my partner on the same network and 1.5Gb data for $20/month! So looking at this Telstra deal, it'd cost you $1656 over 24 months. For me, the total over that time is $1380. So in my case, the author is right. I saved money, I'm not locked into a contract (it's a plan I can change or cancel any time) and I got a really good deal.

              Exactly. If you're truly smart and diligent about looking for deals and buying the best phones with the best value you can save thousands. It makes all plans look patently moronic.

              My older Virgin plan is $450 calls, 2.2GB data, unlimited calls/txt on the same network. It's $29/mth, which is saving you $216 to buy a phone outright. I'd argue my plan is better due to unlimited stuff and more data? To be fair, yes this is a 2yr old plan.

                Same here @stickman. I have what sounds like the same deal, except on a BYO, so it's actually $19/month. I never run out of data or credit, and I pay hardly anything for it. It's also about 2 or 2.5 years old, and I don't plan on changing anytime soon if I don't have to!

            Definitely depends on your handset of choice. Not sure why but a new iphone is close to the same price over 2 years. $869 handset + $40/month prepaid = $1829. Minimum contract is actually $78/month, or $1872 over 2 years. Your Nexus 5 is $300 cheaper on prepaid over the same period.

            I know when I bought my iphone about a year ago the contract was definitely better value. I recall reading something recently where telcos were going to stop subsidising handsets so much, so perhaps the contracts have got significantly worse value recently.

            Also depends on your usage patterns. One place prepaid stings you is sms and data rates. 29 cents per sms, and $2/MB overage charges on prepaid are pretty steep. These "$X00 Call Credit" figures are really misleading when the call rates vary so much. I think they should be legally required to specify call credit in minutes of talk time. Anyway I always thought prepaid call rates were much higher per minute. Turns out, at least on Hellstra, they're actually 10 cents cheaper than the plans.

              yeah, the whole $X of included calls is all smoke and mirrors. I think however I'd still like the peace of mind that comes with no lock in contracts, so you have the option to save more money as you go along etc. But that is a personal choice which influences my decision.
              for me, if the cost was comparable I'd still go out of contract. my desire for flexibility far outweighs the desire for no upfront handset costs and the desire for streamlined billing (prepaid can get a bit fiddly).
              but, we're all different, that's what makes the world interesting!

        You can get $49 telstra cap encore prepaid. 3.8GB/month, $1000 fake money, some other inclusions as well. 4G.

        iPhone 5 64GB, $1000

        $1176 plan + $1000 phone = $2176

        for a 32GB iPhone 5S with 2GB data and unlimited everything else = $109/month = $2616

        And if you get a cheaper iphone and lesser plan, it's even cheaper!

      What are you basing that last sentence off?
      I own a Nexus 5 and just in my friend circle alone, I know at least seven other people who bought a Nexus 5 as well. One of the best (and cheapest) Android phones atm imho.

        Not everyone thinks like you and me. Samsung and Apple are all the rage. We're in the minority, dude.

          I had a Galaxy S3 before this and it started out good, but then started having all sorts of problems.
          I'm not gonna bring up the iOS vs. Android argument here, but people who say any Samsung phone is better than a Nexus either hasn't used a Nexus before or are just biased fanboys/girls.
          Heck, I could drop my Nexus off the second floor, buy another one, and it'd still cost less than a Galaxy S4.

            I have a Nexus S which was manufactured by Samsung. I think it was around before they started making Galaxies though.

            Samsung does a lot of really dumb stuff to the operating system. I have no idea why someone would choose a galaxy 4 over a nexus 5. NFI.

              I went Samsung for the specs, eg faster processer, more RAM, better screen ect ect ect. I've had a SII running a custom ROM for over 2 years and it is still awesome. I went back to the stock ROM for like a week and definitely agree Samsung OS changes are rubbish. These types of modifications are another reason not to buy plan, the Telcos stuff so much junk on their plan mobes.

                The screen is debatable (since SUPERA MOLED can oversaturate and has the weird pixel sub aray.) But it ends up being pretty even, especially in normal lighting.
                The nexus 5 has a faster processor than the s4, and I'm betting the stock nexus runs faster on the OS than the stock gal, since you know, samsung do nothing good to the os.
                Both have the same ram.
                What the samsung does have is a better camera though.

                Am I wrong about any of this?

                Last edited 15/01/14 7:18 pm

                  Quite simply, the Samsung Galaxy S4 is an old phone. The Nexus 5 is a newer phone, and has top-of-the-line specs, at a cheaper price. However, the Nexus 5 lacks what the Galaxy S4 has.

                  Screen quality wise... Yes, debatable indeed. While you say that it is 'weird', I say that most people like the screen (based on sales). It looks nice and vivid, very striking... as opposed to bland. Also, Samsung's using AMOLED technology... so, it's more power efficient.

                  Also the Nexus 5 is cheaper because it doesn't have Samsung's (or other OEM's) overlays. With the Nexus 5, you get the bare essentials, but with the Galaxy S4, you get more. For instance, Dual Window - 2 apps running on the same screen (Youtube and texting / Web browsing and note taking, anyone?) Also their notification bar is much more functional than the Nexus'. Remote controll... But the Galaxy S4 is also much more expensive.

                  Also, the Galaxy S4 has a better battery - this is indisputable.

      I just bought a Nexus 5 outright from Google. So, that's at least one sale!

      Lol, you don't ditch a bundle plan for a sim-only plan at the same price. You ditch it for a sim-only plan that's (at least) $30 cheaper. That's what I did when I switched from a $60 plan to a $13 one. Saving $47 a month over 24 months easily covers the cost of a new phone.

        Where's the $30 saving from, which telco? And you went from a $60 plan to $13 sim-only, with the same value? Hard to believe.

        For reference, Virgin Mobiles sim-only discount is $10/mth. Which is $240 over the life if a 2-year contract, which isn't even a Nexus 5.

          Presumably he switched to an MVNO that resells access to Optus's or Telstra's networks. Depending on what parts of the $60 plan he actually used, I can easily believe that he found a $13 plan that served his needs.

            But then that's not even comparing the same thing. It's like saying you went from a $100month bundle with iPhone 5S to a $13 sim-only plan and a $80 cheap Android - then saying BYO is heaps cheaper.

              That comparison isn't really equivalent at all. The basic services (phone calls, SMS and data) provided by MVNOs that resell Optus is pretty much equivalent to what Optus sells themselves, so it makes sense to compare prices.

              If you want the latest iPhone, you can buy one from Apple directly. A 32GB phone will set you back $999, which is roughly $41/month if you're comparing to a 24 month contract. If you need to take out a loan to afford that, you'll need to adjust for interest accordingly.

              The $13/month SIM only plan won't match your $100/month bundle plan, but you've got ~ $50 to play with after buying the phone outright. If you can't find an equivalent SIM-only plan that provides what you need for less than the $50, you're not looking hard enough.

            That's exactly what I did. I switched from Telstra to LiveConnected. It was over a year ago so the plans have changed, but from what I've seen of current pricing the principle remains the same.

            Oh, and I pulled the "(at least) $30" from the same place that you pulled "$700-900". $30 x 24 = $720. I was just pointing out how much cheaper the plan would have to be to meet your estimate for the cost of an outright phone.

          Simple Math for iphone 5s 32gig on optus

          Bundled Phone + Access = $79per month = $1896
          Outright Phone + Access = $999 + ~$360 for 2 years (on a $15pm reseller) = $1359

          You can narrow the gap if you lower your Optus plan because you don't want any data (why have 4G speeds if you only want 100meg of data though). Of course you're unlikely to get 4G on a reseller for that low price.

            So you're saying the typical $79 Optus plan is comparable in calls and data to a lowly $15pm sim? This is the part that I highly doubt.

            Add in that the signal is lower priority and 4G may/may not be possible (as you said) ...

              The thing is though, to get a high end phone through a contract, you usually have to go on a higher cap, or pay extra handset repayments. So it may be okay value if you need a high cap.

              But if you want a nice phone and don't spend half your life checking facebook or lots of time on calls, BYO and buying outright is a good way to save.

              The point that you're missing is that most of what you get in a plan is only there to entice you to pay more for a phone. Most of the value that the plan offers is only perception- they offer minutes that most people will never use at carefully adjusted and invented rates and terrible data allowances: All calculated to make that "plan" seem like great value, which it never is because that "value" is only what the seller convinces you it is.

              Optus $79
              4G, 600mins calls, 1gb data, unlimited sms
              (i must admit last time i checked i overlooked minutes, and assumed $600, i do like the minute aspect instead of wanky doller amounts that don't mean much)

              The two resellers i normally recomend seem to have gone up,
              LiveConnected $23 (they look to have become quite expensive, my LC $12 plan is better thant he current LC$23)
              4G, $500 (~464minutes of 2minute phone calls), 500mb data, unlimited SMS

              Vaya $18
              4G, $650 calls (somewhere around 600mins of 2 min calls), 1.5GB data, unlimited SMS

              So on Vaya its $72 for 2 years above what i previously thought, still much cheaper than going direct with optus and its 4G it seems. On a purely numbers basis, outright purchase and vaya $18 is the cheaper option.

              I've yet to experience any real problems with a lower priority signal if they do indeed do that (makes sense if they do though). But the the key driver here is value service (which is subjective) not top notch service (yes for some people $200pm on telstra is good value, others $18pm on vaya is too expensive and provides more than they need).

                I just checked out Vaya due to another user below using them. $18 + $15 for data pack is 2.5GB data. I currently get $450 call with rollover, no unlimited SMS, for $29.

                A new article should be made titled Why Two Year Old Plans Make Current Ones Pale in Comparison.

      It is....unless the new plan cuts your data by 25%. Hence why I stayed on my old Telstra $79 plan and kept my 2GB instead of getting the new $80 plan and only getting 1.5GB. And yes, I'm aware I could go a $69 plan and add 1GB via a data pack or $79....what's the point??

        Yep. My contract is $29/mth for $450 calls, rollover, 2.25GB data. I'd have to hop up to a $50 or so plan, plus $10 data pack, then -$10 for the off-contract.. :P

          Mine's $11/month for $500 of calls and text with 1.5GB data. At the time the next plan up was $17 for $700 of calls, free SMS and 2GB. Then $29 had $850 and 3GB. Way beyond what I needed, but seemed like excellent value compared to anything else I'd found at the time. Plans are all so ridiculously expensive.

          Haven't had any problems with service at all since signing up, so that's great.

          Last edited 14/01/14 1:26 pm

            Nice! Who is the company?

              Vaya. Sadly they had to grandfather their old plans as a condition of taking on the 4G-capable ones so they're not quite as good value as they were a year ago, but I think they're still fairly decent.

              Strange that no one seems to mention them much though, I almost didn't come across them at all in my searches.

              Last edited 14/01/14 2:03 pm

                Just got my other half on a vaya $18 plan with a nexus. Now can put more money towards retiring young :-)

                  I am a Vaya customer... on a 2 year contract.
                  From my research, they simply have the best value.

                  They claim to have excellent customer service. But if you've actually dealt with them, they have the WORST CUSTOMER SERVICE, PERIOD. You can't even call it customer 'service'. It's more like, 'playing stupid with you, and making you repeat, until you say 'fvck it' and give up."

                  Also they count their data through MBs, not KBs. THis means that at the end of the month, you'll be charged for say, 2GB, when in reality you've used only 700MB.

                  But bottom line: You get what you pay for.

                  I would NOT recommend Vaya to anyone. Cheap? Yes. But dealing with their customer service? NOT WORTH IT.

                  Thats really good! I'm thinking about getting one of those phones. Does your partner think it's pretty rad?

      Depends on network, if you can live with optus, non plan all the way. P.S. I and plenty of other people I know have nexus devices so not sure about that.

    The prepaid plans nowadays are great. Pity reception still stucks (Amaysim) and pity it takes a month to get a Sim (Aldi).

    Basically people need to work out what they need and shop around and compare. Most people have the data available to them, they are just lazy or never thought about using it. By now most everyone will have had mobile service for at least 2 years. All you have to do is go through your old bills, look at how many calls you make, your average call time, how many sms messages you send and how much data you've used. Some companies even make it easy by providing this info in a format that can be put in to excel. You then look at your averages, and your splurges (like what's the longest phone call you've made and the most messages you've sent per month etc.) Then you make an inflated average, so whatever you use, pad it a bit up so you're not always running out of quota and then shop for plans based on that. If you are in rural areas and need coverage/reliability, go with Telstra. If you live in a major city then look for resellers such as amaysim, internode etc. They often have better plans suited to people that use more data than phone credit and they use optus or vodafone or whoever.

    You then pick a plan, add the cost over two years, add the cost of whatever phone you like outright and compare to a contract. Unless you make a lot of phone calls, or want an iphone, it almost always works out better to buy your own and get a smaller plan. There's no point in spending money on something you're not going to use and being tied in to a contract.

    But does that mean they weren't given a phone with their contract? I know a lot of people who get phones with a contract, break them before they're a quarter of the way through their contract and end up having to use something else until they come up for renewal.

    BYO and SIM only with a MNVO saves a SHITLOAD
    $598 for a HTC One when it was released and $17 a month for plan compared to a similar plan direct from Optus or Telstra was $80 a month.

    I know which one i would rather

    Can someone explain the picture up top and it's relevance to the article?

    And why would a stock image company even make that. I don't understand what it even is.

      "Can someone explain the picture up top and it's relevance to the article?"

      Happy to oblige, It appears to be a picture of a young woman (wearing what appears to be a green velour jumpsuit) with an expression conveying some form of anxiety or frustration, sitting in a cardboard box while holding what appears to be a mobile phone. I imagine that for many it will convey an impression of being constrained/ restricted by ones circumstances. The cardboard box is apparently uncomfortable for the young woman and clearly unsuited to her needs. In this respect a cage may have worked as well (if not a little better) in acting as a metaphor for the restrictions of mobile contract plans; however, portraying a cardboard box as a form of accommodation also brings to mind the notion of homelessness and living in reduced circumstances which may also reference the idea that the young woman's commitment to her mobile phone has led to her having to make some serious financial sacrifices relating to her general well-being. Again, this touches on the article's intent to help readers from spending more money than is reasonable on their mobile phones.

      "Why would a stock image company even make that"

      Perhaps because themes of inappropriate accommodation, unbalanced economic choices and the importance of mobile phones over other more 'essential' items may be illustrated by such an image. These themes are relatively common and the stock image company presumably felt they were fulfilling a commercial need - they were certainly correct in at least this one small instance.

      "I don't understand what it even is."

      It appears to be a picture of a young woman (wearing what appears to be a green velour jumpsuit) with an expression conveying some form of anxiety or frustration, sitting in a cardboard box while holding what appears to be a mobile phone... etc.

    I pay around $30 per month/2 months. Most calls are made through facetime/skype through work and home internet connections. I don't need to be available 24/7. $80 a month for a contract. I can't be bothered paying that much.

    I have just checked, an equivalent plan to what I am currently on (older month to month with Telstra with 1.5Gb data and unlimited texts) with a Nexus 5 is now $80p/m.... I pay $49p/m. So that's $720 for a Nexus 5.... or I could get a 4G Note 3.0 for less than that on Kogan.... I will be holding on to this plan as long as I can as it seems Telstra is just making their plans more expensive and not better value.
    Risk with the pre-paid trick that LH suggests is that at any time they can change the plans. Post paid plans are (legally) harder to alter when someone is still on one, despite what it says in your contract.
    Also, Telstra doesn't want you to know about the pre-paid trick, I went to my local Telstra shop and inquired about it, they told me that it didn't work that way and that if it did then Telstra would put a stop to it. That also speaks volumes about the staff's product knowledge *facepalm*

      hold onto that plan forever...I missed out on it initially by 3 days and I was spewing! I currently pay 60 a month for the same deal you get...telstra are the schaft masters

    The problem I have is I don't make enough calls to justify any plan, I buy a $20 Teltra prepaid voucher every couple months or so that never expires and the offer I use is 15 cents per minute with no flagfall.

    I am on a TPG $1 plan and end up paying $5-6 a month. But that is just me...
    To bad they have discontinued offering that plan...

    With phones as cheap and good as the Nexus 5, It's easier & cheaper to buy outright.

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