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Prepaid Wireless News / Telecom News
Do Extended Wireless Contracts Help Carriers Or Subs?

Date: 11/7/2007 2:58:39 PM

Prepaid mobile telephony has become particularly popular in Europe during the last few years due to a number of practical incentives. For one, it is generally thought to be a more affordable service than contract mobile phones, because prepaid packages do not charge a rental fee the subscriber has to pay every month (they do, however, tend to charge a oneoff connection fee for the service). In addition, prepaid subscribers do not need to have a contract, and they are charged on a payasyougo basis except in some countries – including Switzerland, Thailand, and Malaysia – where the law (according to news reports from the BBC) stipulates prepaid subscribers need to be registered in an attempt to boost national security.


On the other hand, postpaid subscribers are differentiated from prepaid ones in the fact that they are “locked” into a contract of a given duration. This varies from country to country and from operator to operator. According to TelecomWeb’s sister division Tarifica, in the U.K., the minimum contract period has been 12 months for some time. At the end of a contract, a subscriber would typically research what is being offered by the operator, and he or she would either opt for a handset upgrade or to ask for a lower rental price or an additional inclusive allowance (this would also constitute renewal of the contract for a further 12 months). Acquiring a new subscriber costs the operator more than retaining one. With fierce price competition in all European markets and the subscriber base reaching saturation, operators need to help ensure that they keep customers longer.

Therefore, operators are gradually giving incentives to customers that encourage them to commit to longerterm contracts. The attractive offers that correspond to a longer customer commitment have been designed to increase loyalty amongst subscribers while at the same time rewarding them for renewing their contracts for longer periods. Here’s what some European carriers are doing:

>>In The U.K.:

Orange: Orange offers a reduced rental of 10 percent for those who commit to a 24month contract (offering as much as a 25percent discount on the line rental, starting with 10 percent in the first year).

Vodafone: Vodafone encourages subscribers to move to 18month contracts instead of 12month contracts by offering the ‘Stop the Clock’ feature (for calls lasting less than one hour, only the first three minutes will be charged).

O2: O2 offers a 50percent extra monthly allowance for life when customers buy the 18month contract. For example, the O2 200 price plan offers an extra 100 minutes and 100 SMS free every month (the offer applying to certain price plans only).

Virgin Mobile: Virgin Mobile offers a lower monthly rental charge when committing to a 18month contract. For example, Plan 400 inclusive on a 12month contract is a bit more expensive than if taken on a 18month contract.

>>In France:

SFR: SFR offers a minimum contract period of 12 months, but new subscribers can save an additional 10 percent on their monthly rental if they subscribe for 24 months (the Avantage Fidelité option). SFR Intégral Absolu and SFR Interne Absolu subscribers can receive a further 15percent discount if they opt for a 36month contract.

Bouygues Telecom: Bouygues Telecom offers a lower monthly rental if subscribers commit to a 24month contract. For example, Forfait Reference 60 minutes inclusive offers the monthly rental at $26 (U.S.), as opposed to $29 (U.S.) per month, which is the price for subscribers who commit to a 12month contract only (or a 10percent savings on the rental. This type of savings is offered across the majority of Bouygues Telecom plans).

>>In Ireland:

O2: Existing customers receive 25percent more minutes every month when purchasing a new 18month contract.

Going forward in Europe, Tarifica generally is seeing a move to longerterm contracts and greater rewards for customers. The only drawback from the subscriber’s point of view is the fact that he or she is not eligible for a handset upgrade before a contract has expired. With handsets becoming more elaborate and technologically advanced, many subscribers choose an operator and a price plan on the basis of the actual phones on offer. It is, thus, important for certain subscribers to renew their mobile handset regularly in order to keep up with the latest technological developments. In such a scenario, it remains to be seen if customers are willing to commit to longerterm contracts at the expense of keeping existing handsets longer.  Phone Card News Stats


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