Will Amazon’s Arrival Shake Up The Australian Telecom Industry?

Amazon has confirmed its arrival in Australia, along with promises of low rates, fast delivery, and a wide array of selections.

Source: http://www.visatec.com.au/

Amazon is all set to launch in Australia in the last quarter of 2017, and things could shake up for a lot of industries – including Telecom. 79% of Australians have bought smart phones from telcos, and are tied into phone contracts with them. If you have been paying monthly fees on locked contracts for your smart phone – Amazon has some good news for you. More choice, faster delivery and better deals on handsets minus the contracts and other rules that telcos impose on their customers. Is the Amazon promise too good to be true? Let’s discuss a few pros and cons.

What does Amazon have to offer?

Amazon focuses on three core pillars of customer engagement:

Competitive Pricing – which means you can expect lowest deals on handsets – especially since Amazon can ship them directly from the point of manufacture – Asia. Currently, handsets in Australia are sourced from retailers in USA, middlemen and shipping costs inflating the price. Amazon already has relationships with US tier one vendors Apple, HTC, Samsung, Sony, Huawei and Motorola. It can give us the benefit of wholesale purchases straight from the supplier, without the shipping costs from the US.

Complete Product Range – which means Telstra and Optus can no longer control the market by restricting which phones they import. You can expect a new range of mid-tier products like Blu, Fonus, Xgody, and Owbb – brands previously unheard of in Australia. A quick peek at the US Amazon website will give you a taste of things to come – Alcatel, Apple, BlackBerry, BLU, DNRPrime, Fonus, GFTC, HTC, Incipio, Kivors, LG, MegaTronic, Motorola, Neva Wireless, Nokia, NTSElectronics, Owbb
Samsung, Sony, SumacLife, Xenda, Xgody – the list is practically endless.

Logistic Efficiency – which means that products will be shipped, stored and delivered to you much faster and more efficiently. Amazon has warehouses with agreements to let them add capacity quickly when needed. They also have a large amount of consumer data from Australians who have already purchased electronic goods from Amazon in the past. Amazon uses this data to predict buying patterns and stock up on products that will be in-demand – so that you get the best customer service.

Are leasing plans more cost effective?

Of course, when you purchase from Amazon, you have to pay for the handset outright. Telcos, on the other hand, let you pay on a monthly basis and bundle in the calling costs as well. This may seem like a sweeter deal, but is it?

Telstra – Pay per month and then upgrade

Telstra has a $75 per month for 24 months plan for a Samsung Galaxy S8 with the option to upgrade to the next model for an additional $100 after 12 months. This looks good, right? It’s not. Here’s why.

  • If you don’t opt for the upgrade, you end up paying $1800 to Telstra – while you can get the S8 directly at $750 or so and there are much cheaper deals out there for mobile calls too. For example, a $750 S8 and a Kogan Mobile Prepaid plan at $30 per month would still cost you only about $1500 over the two-year period.
  • Telstra still owns your phone at the end of the contract. You cannot sell it off and could end up locked into an endless cycle of perpetual contracts – handing over one phone and taking the next one from Telstra every 12 months.
  • If you damage your phone in the 12-month period, you will have to shell out anywhere from $230 to $500 before upgrading.

Other carriers like Optus and Vodafone are not much better off – even if their monthly instalments are lower they still have plenty of conditional clauses in your contract. For example, Optus charges $62 per month for the Galaxy S8 for a 24-month period. However, at the end of the lease, you are expected to do one of the following:

  • Return the phone to Optus in good working order. If damaged, you need to return the phone and pay additional damage fees.
  • Buy the phone from Optus at fair market value. (How this is calculated given the fact that you have already paid them 62*24 = $1488 is unclear)
  • Continue the lease term for another 6 months – thus the final price of your phone would be $1860 – slightly more than Telstra’s!

Amazon probably the best option if you want to buy outright

Sometimes, it is hard to fork out the phone’s price outright – given the other demands on your salary. In that case you may choose to opt for leasing plans. However damaging or losing your phone could result in you forking out much more, as well as paying extra over the lifetime of the phone.

If you actually want long-term savings, I would recommend buying the phone outright. With Amazon getting better deals, we can expect more customers switching to this option, causing the telcos some serious business loss.


Neil Aitken

Having worked in 3 countries for 4 telcos on both voice and data products, Neil is in a position to give you the inside track. Get beyond the marketing messages to the best plan for you.