Monday, 12 December 2011

Handset leasing - the £266 question

This morning, O2 announced that it would offer a handset leasing proposition for UK mobile phone customers. Regular readers will recall that I've been thinking about this for a couple of years now and blogged about it in May 2010 (if only I'd talked to O2 about it).

On the specific deal in question, I thought it was worth working out who benefits from this deal. The answer, to put no finer point on it, is O2. Financially, that is.

The total price of 12 months of £55 a month contract is £660, but you have to take off 12*£20 = £240 for the airtime, so the handset cost equates to £440 for a £499 phone, which would be worth £325 in perfect condition after 12 months.

If you stumped up the full amount for the handset then you’d have spent a net of £174 for the device. If you leased from O2 you’ve paid £440, so the effective cost is £266 for a new phone every 12 months. A great model for O2, as they’re effectively pocketing that £266 in addition to their profit on the service.

c.20% of UK smartphone customers get a new handset in a given year. BIG question is how many of those are regular upgraders and own their own device. Perhaps they’d like another payment option? In any case, I think this is a "watch this space" for 2012, what with further big handset and tablet launches coming up from Apple, Samsung, Sony and Nokia.

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