Stop! Don’t renew that phone contract. Avoid wasting your hard earned cash!
- Did you sign up to a phone and plan contract 2 years ago? Many did.
- Towards the end of your contract, your phone company is likely to call you and encourage you to ‘upgrade’.
- ‘Upgrading’ means getting a new phone from them and starting your 24 month contract again.
- It’s usually the big phone companies that want to trap you like this – Optus, Telstra and Vodafone.
- We strongly advise against you upgrading your phone!
- The market has changed immeasurably in the last 2 years and will be unrecognizable 24 months from now.
- You can save money and keep flexibility by tying the deal together yourself.
- Stop! Don’t renew that phone contract!
Did you sign up to a phone + plan contract 2 years ago?
Most people buy a phone themselves, these days and add a SIM. Piecing together a deal for yourself in that way is a relatively new phenomenon. Things have changed a lot.
Until a couple of years ago, the most common transaction between individuals and phone companies was for each user to sign a 24 month contract. As part of the agreement they entered, people paid the phone company each month – usually a lot. In exchange, they were given a ‘free’ phone and some voice minutes, SMS and data. Of course, the phone wasn’t ‘free’, it was just included in the price.
Has your phone company just called you out of the blue?
Towards the end of their contract, the phone company would usually contact the contract holder and start saying nice things. They would listen to the complaints the phone user had about the terrible service they’ve put up with. They’d refund some of the charges that had been applied to the person’s account (the ones they’d got that they weren’t expecting). The phone company representative would then try to get the phone owner excited about the new iPhone or Samsung Galaxy device and to re-contract to it.
Are you suspicious of them ? Do you have doubts over what to do next?
Understandably, whichever individual had been called might have suspicious of this behavior from their telco. After all, they usually hadn’t heard anything from their phone company in well over a year and a half. What could possibly have caused them to have such a turn around in the way they wanted to relate?
There are a lot of people in this position. Contracts are coming to an end, the phone company is ringing them. The key question they have is – should they upgrade ?
What is a mobile phone / contract upgrade?
When you maintain your phone contract with your phone company, by renewing it for an additional period, (usually 24 months) you are upgrading.
You will almost always be provided a new phone as part of the deal.
Optus, Telstra and Vodafone are by far the biggest culprits in this turnaround
It can be tempting to buy in to what they’re selling. Phones are a big deal. Some people think their phone reflects their personality. Phones can be treated like fashion accessories just as much as they are treated as productivity or entertainment devices. Additionally, modern smartphones are essentially computers. The cost of the components gets steadily cheaper each year. Two years on, your 24 month old smartphone can seem very old indeed.
For these reasons and more, it’s tempting to listen to the sales representative that calls you and sign what they send you. There’s the lure of the phone on offer and, conversely, the alternative is a nightmare. If you don’t renew, you’ll have to figure out yourself what to do next from a raft of options.
If you remember one thing, remember this: As in insurance, mortgage credit cards or any of the other things we need to give time to consider, laziness is exploited. Remember, the market will have changed pretty dramatically since you last shopped around. Here’s what you need to know.
Why you shouldn’t upgrade any phone these days
The simple truth is, if you do things right at the end of your phone contract, your monthly phone bill could be reduced from $70 a month to $30 or less a month.
This is what has changed while you’ve been in contract.
- Data trends:
Your data usage is doubling every year. If you’re in a phone contract, you will get stuck with extra costs. Luckily, the opposite is also true. If you are outside your phone contract, they will give you the extra data you need.
- Only half of the new phones are big improvements:
This is more true of Apple than Samsung. Release cycles mean that it’s only every 2 years that Apple phones get a significant upgrade. Every ‘other year’ it’s a relatively small improvement. You can afford to wait.
- You have learned your lesson:
Look back on the out of bundle charges you had as part of your last phone contract. Remember how bad it felt each month when you had to pay the extra for the data at the end of your contract ? So many people have complained so much about this that the market has changed. Buying prepaid deals to get a SIM avoids this problem.
- People are holding on to their phones longer:
Average iPhone tenure has increased from 24 months to 30 months in the last 2 years. This single step can lower your costs enormously. Remember, those phones aren’t free. When you’re out of contract, you might well be able to get a SIM which provides you what you were getting by way of network services for $30 or less.
Don’t upgrade! Pick one of these alternatives
If you don’t upgrade, you will either keep your phone or get a new one and then add a SIM. Here are your options.
- It’s almost always cheaper to tie together the deal yourself:
If you really feel you must have the latest phone, you should still avoid signing a new contract with your phone company. You can tie together a deal on your own and it will almost certainly work out cheaper.
- You don’t need a new phone:
Just keep the phone you have. Recent analysis shows that people are keeping their iPhones 6 months longer. Keeping your existing phone means the conversation you are having with your phone company changes dramatically. They will still try and keep your custom but they will offer you SIM Only / prepaid plans.
- You can now lease a phone in Australia:
Even if you are struggling to buy a phone outright yourself – they can cost up to $1000 of course – there are other options. There really is no excuse for suggesting you need to get a phone under contract with your phone company these days. Consider leasing a phone, or buying a second hand phone. Then add a SIM as required.
Why you shouldn’t upgrade your Telstra Phone
There are good reasons not to renew your contract with Telstra specifically.
- They’re a lot more expensive:
Telstra charge more than any other telco for their services. Their postpaid range starts at $50 a month – and that’s without a device ! Most Telstra customers end up spending $70 – $100 on a plan which has a phone and a SIM.
- Telstra can no longer justify the premium they charge for their network:
With story after story you will find much better pricing than Telstra’s if you have a look at Optus and Vodafone’s. And now, the 4G networks from the main phone companies are all about the same in terms of performance.
Why you shouldn’t upgrade your Optus Phone
Unusually, the reasons you shouldn’t sign up to Optus’ contracts are because, if you do, you might preclude your own access to some of their better services.
- They’re innovating fast:
If you’re tied in to a contract with Optus, you might miss out on some of the more innovative services they’re launching. In the last 12 months, Optus have signed up the English premier League (EPL), they’ve started offering streamed audio, put in place family plans and even streamed video in some of their plans. They have completely revamped their service offering in a way which is often not even offered to customers on existing contracts.
- You won’t be able to get a phone with a prepaid plan:
We believe Optus’ best deals are their prepaid plans. If you take a contract, you will be given a postpaid plan. You can find out more in our comparison article Optus prepaid vs Optus postpaid plans.
Why you shouldn’t upgrade your Vodafone phone
Vodafone have been a risky company to make a long term investment in as a customer for some time. The forecast for the next two years is not significantly different.
- They are not as competitive as they used to be:
Vodafone’s pricing has gone up and is now in line with Optus’. Vodafone no longer offers the same value it used to, especially when it comes to their prepaid plans.
- They are not offering the same Entertainment services that Optus and Telstra are:
Now is not the time to commit to a long tenure with Vodafone. Although Telstra and Optus have made mistakes in the rollout of their entertainment services, Vodafone is nowhere to be seen in the battle.
Summing up – Our advice? Don’t sign another phone contract and never upgrade your plan
As a general rule, the phone companies want to keep you in contract so you don’t leave. There are exceptions, for example, when they’re trying to buy market share with the launch of a prestigious new device. Then they want to lure you in with a contract at a great price and, under those circumstances, it can make sense to accept it. But that’s the exception, not the rule.
Buying a phone outright is now commonplace for more than 60% of the market. There is always going to be a new device released every few months and the truth is that they are not that different to the last ones which came out (although sales do not seem to be decreasing.)
From your standpoint, it makes sense to get real about the contract you’re signing. You won’t get any new apps. You probably won’t get any coverage improvement (there are exceptions). There probably won’t be a notable performance improvement. The features your new phone has will be a marginal, improvement.
The truth is that none of us have any way of knowing what the world holds in the next two years. Donald Trump is president of the USA you know. 24 months from now, there will be more device options, more plan options, more understanding of the data you have and use on your phone. There could even be new phone companies to choose from.
Unless you are flush with cash and keen to flash, you don’t need to upgrade your phone every two years. The maths, the majority of the public and the other things you could spend your money are all telling you to keep your phone and add a SIM Only or a prepaid plan.