Optus follows Telstra, tosses phone leasing plans aside
Once upon a time on Optus, customers rented phones for a couple of years, after which they were required to return them to their telco. The scheme is referred to as phone leasing, with one of its supposed benefits being a measly average savings of 10 bucks per month. When the customer’s lease period expires, the phone could be exchanged for another, at which point a couple more years of monthly payments for another phone you don’t own begins all over again.
Telstra scrapped this scheme recently when it refreshed its postpaid plans. Now, Optus follows suit, quietly axing the controversial practice without any major announcement. The telco now offer no-lease plans where customers own the phone outright at the end of the contract term. This is a wise move — the telco, understandably, would rather not be left alone holding the bag of such an unfavourable scheme.
Optus customers will now own their phones with new no-lease plans. Source.
Optus’ new scheme
Optus’ move to get rid of leasing plans is good news for consumers. Where the old scheme only allowed customers rent a smartphone for a couple of years or so, the customer will now own the phone outright at the end of the contract term under the new, no-lease scheme. The new scheme really only applies to new customers, and existing customers will have to make some adjustments to participate.
Existing customers will have some questions though, particularly dealing with what happens to their current leasing contracts. Such customers have several choices depending on how far into the leasing term they are. Here’s a quick look:
- Less than 12 months in:
If you’re at this stage of your lease and you’d like an upgrade, you’d have to recontract to the new no-lease scheme, where you’d own the phone outright. That means you start a fresh contract. It also means you have to pay a cancellation fee as well as the remainder of your data plan. - 12 to 24 months in:
If you fall into this category, all you have to do is return your phone, pay a $99 fee, and sign a new 24-month contract for a new device under the new scheme where you would own the phone outright at the conclusion of the term. - Your lease has expired:
Those in this category fall into previous leasing terms. That is, you can simply return the phone or chose to buy it at “fair-market value”. After that, you can obviously sign up for another contract under the new no-lease scheme.
This summary isn’t exhaustive though, some other terms apply. For example, Optus has to deem your phone “in good working order” for things to go smoothly. If they decide it isn’t, then more fees apply.
Also, these terms might seem confusing and/or unfair. For example, wouldn’t it be fair for existing phone lease customers to simply own their phone at the end of their current lease term? That is, why not just allow customers switch their existing phone lease contracts over to the new scheme without charging any fees? There are bound to be some unhappy existing customers with a lot of questions here. Perhaps that’s why Optus chose to quitely eliminate leasing plans without making any major announcements.
The unfairness of phone leasing plans
Not all telcos joined the phone leasing train. The two front runners were Telstra and Optus, and they just happen to be the two largest telcos in Australia. The scheme seemed to benefit the telcos alone in a have-your-cake-and-eat-it sort of way — customer rents phone for 2 years or so, pays in monthly instalments, saves around $10 a month, and then gives the phone back when the lease term expires.
That customer was also required to buy a contract phone plan along with the phone. And in the case of any early termination of the phone lease contract, not only would the balance of the lease term have to paid off in full, but also the balance of the phone data plan. This all seems entirely unfair to the customer who goes home empty handed.
To be fair though, the scheme had its benefits for a certain segment — early adopters. Consumers who just have to have the latest phones could simply lease a newly released phone for 24 months, return it, and then lease the newer model for another couple of years. Further, as mentioned, the scheme did present monthly savings, albeit minimal, and it also served as a way to avoid paying upfront costs.
But the benefits are only benefits for a few. In reality, saving $10 per month over a 24-month period only amounts to $240. The “only” comes into play when you consider the fact that you don’t own the phone. In other words, that $240 wasn’t really “saving” you anything because you’d be without a phone at the end of the lease term, meaning you’d have to spend more money to get another one.
There was, however, an option to buy the phone at “fair market value” when your lease ends. But this means paying even more money for a phone that’s now been used (2 or 3 years old), in which case your $240 in “savings” evaporates into purchasing it, which likely won’t even cover the entire “fair market value” price tag. The terms of these leasing plans were just so convoluted that customers hardly ever understood what they were getting into in the first place.
Over 83 percent of Australians have no idea of how phone leasing works.
Those who did understand, however, saw how unfair phone leasing was to the customer. As a result, the scheme grew increasingly unpopular, leading to Telstra’s recent decision to drop it altogether. Optus has now done the same, and this brings the practice to a joyful end as far as customers are concerned. With fair treatment being a big deal for today’s telco customers, axing phone leasing is certainly the right way to go.
Final words — Optus following Telstra’s lead?
Optus recently announced its addition of Apple Music to its entertainment inclusions with a 6 or 12 months free subscription to the service. This came long after Telstra, who have offered the service for some time now and, unlike Optus, does so data-free.
Now, Optus scraps phone leasing plans after Telstra recently did the same. Obviously, Optus is in no mood to be left behind in the increasingly competitive Australian telco market. This competition plays out well for the consumer, as services and plans become simpler, better and, most importantly, fairer. With the latest being the two largest telcos tossing phone leasing aside, we can’t wait to see what the next win is for the consumer.