Britons spend more than six billion on phone contracts annually

Mobile phone carriers are putting more emphasis upon contract purchases of phones than ever before. The profit margins they make are much more in line with what their shareholders want to be seeing, and if you keep an eye on the advertisements they come up with, you'll notice that "Pay and Go" is receiving as little coverage as possible. Carriers know this is the case and they embrace it themselves, for it is a license to print money. It's a bottomless pit of resources and profits, and in the UK alone the effects of the focus upon contract purchases is being seen. In Britain alone people are wasting six billion GBP annually on contracts they don't need.

That's an increase of £1.1 billion over last year. Back in 2005 we estimated we would be paying £2.37 billion to host the 2012 Olympics in London. While it's a huge amount itself, the Olympics have never been a cheap event. The estimate might have been hopelessly optimistic, but poor choices for phone contracts could have eased the financial burden of hosting a global event such as the Olympic Games. While it is an older article, from January of this year, the Daily Mail observes the cost of the 2012 Olympics in more detail. The loss made on phone contracts is surprising, and some of that money surely could have been diverted into the costs for hosting at some point.

Statistics from the National Mobile Report 2012 (the link will prompt a download for the report, in PDF format) indicate 26 million people in the UK are on overpriced tariffs for their phones. On average they pay for three times the amount of data/calls/SMS that they actually use. This could be cut down very easily, with the estimation that of the £6 billion being spent annually, up to £4.32 billion of it could be saved. In some ways it is genius for the mobile network providers, for the amount of money they're raking in is almost unbelievable. The love of newer smartphones means that they can charge much more than the phone's own retail price, and then go to town on offering data allowances and calling allowances.

The world of contract phones is difficult to come to terms with, since it is a labyrinth which constantly changes depending on the latest releases. The phone market constantly changes with adjusted prices, or contracts on special offers including 'free' bonuses such as Xbox games consoles you'll end up paying for in the long run as part of the contract. The obvious solution to counter expensive contracts is to shop around, and see if you can find a better deal elsewhere. Carriers such as Giffgaff operate differently to the major carriers, such as Orange and O2, and they can be much cheaper for some purposes. There are always going to be some exceptions though, where the contract is the better choice.

Just one B-2 Spirit? Why not get another two?

Six billion pounds is a huge amount to spend even if you know you're spending it. Few people could spend that much money if they tried, short of buying a couple of B-2 Spirit stealth bombers or an aircraft carrier. With the confusion or lack of knowing among some consumers, it all comes together to make an extremely lucrative business for the networks. The only other course of action is to look for an alternative, and that isn't always the easiest thing to do. It takes research and dedication, but can be done.

Source: The Telegraph | B-2 Spirit via Wikipedia

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16 Comments

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I look at it this way if I can't afford the phone outright and get a good deal on the contract do I really need it probably not and do I really need to be in constant contact with facebook or whatever the latest fad is probably not so I don't need the latest greatest phone with all the wiz bang bells and whistles that I'll probably never use ( I still own and use an LG GW300) it does txt's calls and email can take 2Mp pics (1600x1200) and I don't play games or do facebook on it because that's not what a phone is for and it only costs me $20NZD every 3 months (prepay)

A depressing side effect of this (apart from the huge waste of money) is looking at my monthly bill and realising just how few of the free minutes I've used. 900 minutes, what was I thinking?!

I don't have any friends and mummy doesn't care. Woe is me.

Okay I have 600 minutes for £10.25 and frequently use only 300minutes... so I could go down to a £8 contract... but some months I use 500... if I went with the lower contract and then went over by 200minutes I'd pay £70 for those calls. In this situation it only works out cheaper if I only go over by this amount once every 31 months... which certainly isn't the case.

GiffGaff is the way forward, but the phone outright, £10 a month, unlimited data, 250mins and unlimited txt, no contract either.

"The loss made on phone contracts is surprising, and some of that money surely could have been diverted into the costs for hosting at some point."

Yeah, I'm sure all Britain's would willingly pay towards hosting the Olympics LOL!

They're not free at all, it's factored into the price and usually a compulsory period of contract. I know people that have "sim only" contracts and they get quite a bit more than I do for a lot less money and they aren't binded to it for 12/24 months either.

Indeed, they pay more for an expensive phone but with the same deal.
We're also stuck on an average of 24 months contract. For me, some months I use half my minutes and some months I go over.
It's unpredictable and we're stuck with it. Better off going with GiffGaff.

I don't use all my minutes or texts, but then I do have a £400 phone that I wouldn't be able to afford if I had to pay for it up front.

hotdog963al said,
£15/m for me, buying the phone out-right is the key!

Same! I spend £15 a month on 3, because I like there internet, very fast and unlimited

This was me for years and years. I've had mobile contracts pretty much for the last 10 or so years. For some reason this year I stopped and looked at what it was costing me, and how little I was using the phone.. I decided enough was enough!

I've stuck with my 2 year old HTC Desire for the time being, and I switched to a Three SIM-only deal for £10 a month which I got through a QuidCo deal - so for 12 months it'll cost me a total of £20! Compare that to my Vodafone contract which was costing me £35/month!

So far no regrets. And then, when I decide I want to, I am free to upgrade my handset.. I'll just wait for the next shiny phone to come out and all the mass adopters will ditch their current-gen handsets (which I'd consider to be a big step up from the Desire) and it won't have cost me a fortune

I pay for a more expensive contract than I need because I want one with high data usage and there are very few contracts that have a low number of free texts/minutes but have a good amount of data usage.