Archive for October 31st, 2008

Is A Free Handset Worth 2 Year Commitment For A Postpaid Line?

Published by Babar Bhatti on October 31, 2008 under Business, Competitive Trends, Consumer Rights, Emerging Markets Telecom, Mobile Companies, Mobile Phones

Short answer is: No, especially if you are afraid of commitments.  As you may have noticed in the newspaper ads or billboards, Ufone has partnered with Habib Bank to offer free handsets to new or existing customers of HBL credit card who agree to get a Ufone post paid connection package for a two year commitment. Customers will have to pay their bills through HBL credit card. This seems to be a departure from the usual deals, in a market where people are used to switching phones freely and after relatively short period of time.

It looks like someone in Ufone has taken this straight out of the playbook of a US telecom company. The business practice of giving free (or subsidized) handsets to lure customers into long contracts is pervasive in the US. Most consumers like getting free handsets of their choice but no one likes the accompanying contracts and the terms and conditions. There is usually a fee associated with early termination of the contract. Recently there has been plenty of consumer resentment against these contract based offers and more mobile carriers have started offering more month-to-month packages.

In this particular of Ufone and HBL, there are a few things which the buyer should be beware of. First, I would strongly caution anyone against getting one more credit card just for the sake of a free phone. Now let’s analyse the offer. The total cost of the two year line commitment can be so high that it may not be worth the free phone.  There are five plans to choose from with line rents varying from 599 to 3499 Rs and include airtime and sms buckets. The handsets range from Nokia 1680, 2630 to Samsung M150, G800 to Blackberry models etc. Higher the line rent, better is the handset. Customer’s monthly charges will appear automatically on the HBL Credit Card statement.

The customer will be required to adhere to the terms and conditions of the contract for a two-year period which is a very long time for Pakistani market. If you change your mind before you complete the two year contract, there will be a penalty.

Consider this example of package number 5 which has line rent of Rs.3499. Over two years, it will be almost Rs. 84000. Then there are the details of included minutes and sms …. the usual stuff which goes along with these packages.

Unless you have performed the calculations and are convinced that this is a good deal for you, I would not advise going along with this kind offer. You are probably better off living the free life which you are already used to.