The "free" mobile phone that ends up costing 1,000 euros
A Samsung Galaxy S "free" with an 18-month lock-in contract costs 900€. The same handset unlocked costs 400€. Low-cost alternatives from 5€/month.
English · Original discussion in Spanish · Published
Free mobile phone? The real cost of a subsidized handset exceeds 900 euros
Buying a subsidized mobile phone with a lock-in contract is one of the worst financial decisions a consumer can make. What carriers sell as "free" turns into an extra cost of up to 900 euros over 18 months, as the analysis of a typical purchase shows: a "free" Samsung Galaxy S with a 50-euro monthly plan adds up to 900 euros in spending, while the same unlocked handset costs 400 euros and lets you choose a much cheaper plan. However, not everyone needs a high-end smartphone, and for those who only want to make calls and send SMS, the most rational option is a basic unlocked phone with a low-cost plan.
The "free" handset scam
The paradigmatic case: a buyer considers a Samsung Galaxy S that the store offers at no upfront cost in exchange for an 18-month lock-in with a flat voice and internet plan at 50 euros per month. After doing the math, they discover they will end up paying almost 1,000 euros, when the unlocked handset costs around 400 euros. The difference is 500 euros, which goes straight into the carrier's pocket. Lock-in contracts and minimum spending requirements are the trap: the "flat" plan has limitations that turn it into a fixed expense that is hard to reduce.
Low-cost alternatives: prepaid vs. no-commitment contracts
Against the model of the big carriers, mobile virtual network operators (MVNOs) such as Pepephone, Simyo or MásMóvil have emerged, offering plans with no commitment or minimum spend. At the time of the analysis, Pepephone charged 5 cents per minute (later dropping to 3.5 cents), Simyo 8 cents and MásMóvil 5.9 cents including VAT on automatic prepaid. The key is to combine a cheap unlocked handset with one of these plans. For example, a Nokia 1616 for 9 euros at Movistar stores, or a Samsung E1150 for 16 euros, or even an unlocked Alcatel OT208 for just 5 euros by taking advantage of a number portability switch. The savings compared to a traditional contract are enormous.
The unlocking dilemma and deals
A contentious point is the cost of unlocking a handset bought from a carrier. Unlocking a Nokia 2680, for example, can cost more than 20 euros if done by IMEI, which makes the operation more expensive. That is why buying handsets that are already unlocked, or from operators that sell them unlocked (like Simyo with its LG for 15 euros), is more cost-effective. Occasional deals also appear, such as a Movistar Samsung C3300 touchscreen for 19 euros with 6 euros of credit, which comes out at around 20 euros after unlocking. A bargain for anyone wanting a basic phone with a touchscreen.
Is a smartphone worth it?
Not everyone needs a smartphone. For basic calls and SMS use, a simple handset is enough and avoids the temptation of signing up for unnecessary mobile data. Those who really need internet on the go can opt for an unlocked Nexus One for around 400 euros and then switch to an MVNO with no commitment, but always calculating the total cost. The final decision depends on your usage profile, but the numbers don't lie: the subsidized phone is, with rare exceptions, a financial trap.
Conclusion: the future of mobile telephony
The downward trend in MVNO rates and consumers' growing awareness suggest that the subsidized handset model with lock-in contracts is living on borrowed time. If low-cost plan prices keep falling, the big carriers will be forced to change their strategy. For now, for the informed consumer, the golden rule is: unlocked handset + no-commitment plan. Everything else is marketing noise.
Related discussions in the forum
Buying a subsidized mobile phone with a lock-in contract is one of the worst financial decisions a consumer can make. What carriers sell as "free" turns into an extra cost of up to 900 euros over 18 months, as the analysis of a typical purchase shows: a "free" Samsung Galaxy S with a 50-euro monthly plan adds up to 900 euros in spending, while the same unlocked handset costs 400 euros and lets you choose a much cheaper plan. However, not everyone needs a high-end smartphone, and for those who only want to make calls and send SMS, the most rational option is a basic unlocked phone with a low-cost plan.
The "free" handset scam
The paradigmatic case: a buyer considers a Samsung Galaxy S that the store offers at no upfront cost in exchange for an 18-month lock-in with a flat voice and internet plan at 50 euros per month. After doing the math, they discover they will end up paying almost 1,000 euros, when the unlocked handset costs around 400 euros. The difference is 500 euros, which goes straight into the carrier's pocket. Lock-in contracts and minimum spending requirements are the trap: the "flat" plan has limitations that turn it into a fixed expense that is hard to reduce.
Low-cost alternatives: prepaid vs. no-commitment contracts
Against the model of the big carriers, mobile virtual network operators (MVNOs) such as Pepephone, Simyo or MásMóvil have emerged, offering plans with no commitment or minimum spend. At the time of the analysis, Pepephone charged 5 cents per minute (later dropping to 3.5 cents), Simyo 8 cents and MásMóvil 5.9 cents including VAT on automatic prepaid. The key is to combine a cheap unlocked handset with one of these plans. For example, a Nokia 1616 for 9 euros at Movistar stores, or a Samsung E1150 for 16 euros, or even an unlocked Alcatel OT208 for just 5 euros by taking advantage of a number portability switch. The savings compared to a traditional contract are enormous.
The unlocking dilemma and deals
A contentious point is the cost of unlocking a handset bought from a carrier. Unlocking a Nokia 2680, for example, can cost more than 20 euros if done by IMEI, which makes the operation more expensive. That is why buying handsets that are already unlocked, or from operators that sell them unlocked (like Simyo with its LG for 15 euros), is more cost-effective. Occasional deals also appear, such as a Movistar Samsung C3300 touchscreen for 19 euros with 6 euros of credit, which comes out at around 20 euros after unlocking. A bargain for anyone wanting a basic phone with a touchscreen.
Is a smartphone worth it?
Not everyone needs a smartphone. For basic calls and SMS use, a simple handset is enough and avoids the temptation of signing up for unnecessary mobile data. Those who really need internet on the go can opt for an unlocked Nexus One for around 400 euros and then switch to an MVNO with no commitment, but always calculating the total cost. The final decision depends on your usage profile, but the numbers don't lie: the subsidized phone is, with rare exceptions, a financial trap.
Conclusion: the future of mobile telephony
The downward trend in MVNO rates and consumers' growing awareness suggest that the subsidized handset model with lock-in contracts is living on borrowed time. If low-cost plan prices keep falling, the big carriers will be forced to change their strategy. For now, for the informed consumer, the golden rule is: unlocked handset + no-commitment plan. Everything else is marketing noise.
Related discussions in the forum
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Summary of a discussion on Burbuja.info - Foro de economía, actualidad y política., translated from Spanish and reviewed before publication. Read the full discussion (31 replies).
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