Telstra’s 'New Phone Feeling' feels like renting

Summary: Telstra has announced a new add-on for phone contracts that allows customers to upgrade their phone every 12-months. But is it worth the extra money?

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Telstra has announced it will soon let customers upgrade their phones after only 12-months into a contract term, but the process will be costly for its customers.

The telco is calling the new system ‘New Phone Feeling’ (NPF) and it will be an optional $10 per-month add-on for any customer signing up for a standard Handset Plan. But, as per the conditions of the product, customers will have to give their current phones back when they upgrade to a newer model, making it that they effectively pay for the phone in its entirety in half the time, then relinquish ownership of it.

To illustrate this, let’s look at how this would work with a phone available today: the Samsung Galaxy S4.

Handset Plan New Phone Feeling Plan
Handset repayment $9 p.m. $19 p.m (including NFP)
Example Plan cost $55 $55
Min. payments at 12-months $768 $888
Min. payments at 24-months $1536 $1776
Cost of phone 12-months $108 $228
Cost of phone 24-months $216 $456

As you can see in the example above, over the life of a 24-month contract you would pay $216 for a GS4 in handset repayments. With NPF, you will pay $228 in the first 12-months, so already you are slightly behind.

You also need to be pretty confident that you will upgrade at as close to 12-months as possible. Every month that you wait there after is damaging the value proposition of the New Phone Feeling.

Furthermore, Telstra charge a $10 premium between the cost of its Handset Plans and its BYO phone plans, so we can assume that this $10 also goes to paying off the phone. Over the 12-months of a NPF plan, this means the GS4 will cost $348.

But the real kicker is that you then hand the phone in. You have paid $350 in repayments for the phone, and then you give the phone back to Telstra (in good working condition) and start all over again with a new model. You basically pay the money for the use of the phone and at the end of the contract you have nothing to show for it.

Why not try a 12-month plan instead?

If you are concerned about being left behind the technology 8-ball every 12-months, perhaps consider a 12-month plan with Vodafone. You will pay a bit extra month-to-month (about $30 in handset repayments compared with the $20 Telstra is charging) but you do retain ownership of the phone at the end of the 12-months. You are free to on-sell the phone or share it with someone you know who needs a new phone.

We'll compare the Galaxy S4 again, this time using a new Telstra $70 Mobile Accelerate plan and a $65 Vodafone Red plan, both of which include 1.5GB of data each month.

Telstra NPF Vodafone Red (12-month)
Handset repayment $19 $32
Plan cost $70 $65
Min. cost after 12-months $1068 $1164
Handset cost after 12-months $228 $384
Keep the phone? No Yes

It’s a shame Telstra didn’t go down the route of offering 12-month plans with these changes, rather than following the current model in the US. An option to pay-out the phone seems much fairer to us than a plan where you give the phone back at the end of the contract period.

Telstra's new Mobile Accelerate plans and the New Phone Feeling offering will be available from March 4, 2014.

To be continued...

The four major US telcos all announced similar early upgrade plans at the end of 2013, starting with the T-Mobile 'Unleashed' plans. Since then, each has made several considerable amendments to how the plans work, and one telco -- Sprint -- shut down its upgrade program altogether.

Which is to say, this might not be the final version of Telstra's upgrade plans either. This is especially true if other Aussie telcos join in with their own 'Unleashed' plans too.

One of the best value of the 'unleashed' plans in the US is from T-Mobile, who bundle in handset insurance into the cost of the program. Currently Telstra charges a $9.95 per-month fee for basic handset insurance, and it were to include this in the cost of its NPF plans then it would make them a lot more enticing indeed.

Watch this space.


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