Your cellphone contract coming to an end? Time to consider a prepaid option

If you have a mobile contract subscription with any of the main mobile operators – MTN, Vodacom, Cell C and 8ta, you will most probably renew you contract with the same company on expiry. There is a good chance that you will take out contracts for your family with the same company as well. This is logical, as the average person does not like to “fix it if it ain’t broken”. A mobile contract is like a bank account, or an ID number. Most of us feel that canceling it is too much trouble than it is worth. This consumer inertia is fundamental to mobile operators’ preference for mobile contracts.

Ok. I know there is a status thing linked to a mobile contract subscription – even though many of you will not admit it. Understandably, this is the ideal way to own that fancy mobile device you have always wanted, and which you can hardly afford to buy in cash (top-end smartphone prices range between R7,000 and R10,000!). Right? Whatever is the reason for preferring a mobile contract subscription, mobile operators are not complaining, your CLTV (Customer Lifetime Value) is higher than that of a prepaid cellphone user.

InformUrself 27.06.1

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As a result, mobile operators are willing to “discount” mobile contract offerings as a sweetener. This means mobile contract subscribers get more value depending on packages taken, including cheaper call rates and freebies – free airtime, SMS’s and data. In addition, the after-sales support for contract subscriptions tends to be better than prepaid. There is another reason why mobile operators love contract subscribers, and it is called cross-selling.

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Simply put, contract subscriptions yield more revenue per unit, a.k.a ARPU for mobile operators, because they (contract subscriptions) are taken out by people who have more propensity to purchase mobile products and services. Remember, you can only take out a mobile contract subscription if you already have a trackable and healthy debt servicing record. Unfortunately, South Africa has a huge section of consumers whose credit status will not allow them to take out any debt, this explains why the contract:prepaid ratio is 1:5. Despite main focus on contract subscriptions, there have been innovations in the prepaid market, notably Vodacom’s “Please Call Me” invention that is a world first.

A standard cellphone contract is 24 months. If your contract is due to expire soon, this may be a good time to consider a prepaid subscription. Sounds counter-intuitive? Consider the following 5 developments:

  • Huawei Ideos

    Huawei Ideos

    The rate of introduction of new and upgraded smartphones is increasing. Take for example Apple, which released iPhone 3GS in June 2009, this was since followed by iPhone 4 (June 20120) and iPhone 4S (October 2011); and there are talks that iPhone 5 will be out before the end of 2012. That will be 1 new/upgraded model a year. Samsung has followed suit with rapid introduction of its new and advanced smartphones such as the latest Galaxy S III. A similar trend is experienced at the entry level of the smartphone market, where Huawei Ideos is billed as the cheapest  smartphone at R800. This trend indicates that waiting for 2 years before upgrading a cellphone could feel like a lifetime.

  • The mobile market is becoming increasingly vibrant, resulting in introduction of inventive single and bundled prepaid products.
CellC 3-in-1

Cell C – All-in-1 Package

  • With latest consumer-friendly number porting regulations, you can retain your number, while taking advantage of competitive rates across the mobile market landscape. All you need to do is port your number to a preferred mobile operator, and this can be reversed or ported again after 2 months.This is like eating your cake and having it!
  • The mobile device market is opening up. Until recently mobile operators had exclusive retail deals with most popular mobile phone brands – resulting in artificially high prices. This is changing with time, and it is driven by the grey market. In the near future, you will be able to buy your favorite smartphone at Shoprite, where price competition is key.
  • Internet and mobile banking options make it very easy to buy prepaid airtime, which gets recharged directly against your specified cell number. This increases convenience, and takes care of the fear associated with running out.

Mobile operators would like you renew your mobile contract, hence they start calling and enticing you with their cellphone upgrade options up to 2 months before expiry of your contract. However, it may be worth your while scratching the prepaid market surface before you “sign your life away” for another 24 months.

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