When Huawei announced its latest premium smartphone, the Huawei Mate 7, it did so with a glitzy launch at Sydney's Star City Casino, complete with booming sound, ebullient speeches and laser lights. Because apparently nothing says high-end smartphones like lasers. Huawei's usually played in the "value" category for smartphones, offering sensible models for moderate prices, and sometimes dipping in the shallow end of the premium pool with slightly higher end offerings.
Not so with the Huawei Ascend Mate 7, which is genuinely a top notch contender, although this isn't intended to be a review of that handset. The interesting thing with the Ascend Mate 7 is that the first wave of sales won't be through a telco or on a contract, although there will be a separate model with less storage offered on contract through Vodafone.
Or in other words, if you want Huawei Ascend Mate 7, you've got to pony up $699 upfront for the privilege, plus carrier costs. It's not just Huawei going down this path, either. HTC's camera-centric Desire Eye smartphone is a JB Hi-Fi exclusive at $799. You can't even buy any of Motorola's recent phones except as outright purchases.
The same has been true for handsets from Nokia/Microsoft, and Australia was notable as one of the few places to offer Apple's iPhone ranges for outright sale before anywhere else, although that has also given rise to the spectacle of launch day queues at Apple stores awash with folk looking to buy phones for quick shipment overseas where they've yet to launch.
Being able to pay upfront for a smartphone is nothing new, although what has changed here are the quantity of premium handsets that aren't being offered by telcos on contract plans. Contracts make sense for a lot of people because they figure they can pay whatever the monthly fee is and absorb the cost over time, but the reality in the Australian marketplace is that carriers appear (from the outside; I'm not privy to their internal discussions per se) less willing to subsidise the costs of handsets as they once were, and as a result there are fewer handsets being offered that way, and the handsets that are offered often have heavier repayment schedules built into them. If you want an outright-only handset you simply don't have the choice and will have to pay the full handset cost upfront, but that doesn't have to equate to actually paying more over the life of the contract itself.
Let's look at some figures here to illustrate the point, using Samsung's Galaxy Note 4 as an example, and Telstra's network as our pricing guide.
The cheapest Telstra plan for the Galaxy Note 4 on contract is the S plan, which at the time of writing would set you back $77 per month over 24 months with $550 "worth" of talk and text and 500MB of data. I'm going to throw out the talk and text value, not because people never call me any more, but simply because on both contract and prepaid it's almost ludicrously easy to get a quantity of talk and text time that approaches unlimited with very little difficulty. Data is where the real consumer cost actually is. That plan comes with 500MB of data per month, and at the time of writing there's an option to get another 500MB of data each month over the life of the plan, for a total of 1GB per month. Minimum total cost there is $1848 over two years.
What's the prepaid alternative? The Galaxy Note 4 has an official Samsung RRP of $949, although if you're buying outright it's not too hard to score one for around $900 instead. Let's go with that official pricing for now, however.
If all you want is 1GB of Telstra data to use per month on a prepaid basis, you've got a few choices. Telstra's best plan used to be Cap Encore, but it retired that plan in favour of its "Freedom" plans, which temptingly offer double the data for a limited period, but require cold, hard cash for data packs rather than letting you use your accumulated credit. Its Beyond Talk package however will let you use cap credit to buy data packs, and you could opt for a $30 recharge with 300MB of included data, spend $20 of that $30 "worth" of credit on a 700MB data pack and end up with a phone with 1GB of data to use each month for a total cost over two years, including the handset of only $1669. Not only that, but because you're only using $20 of your saved credit, it would be feasible to buy more data every other month if required, whereas adding more data to the contract version of the same device will just increase your overall contract spend.
Buying the Note 4 outright would put a larger initial hole in your wallet, but over time you'd actively save money, and that's without the added ability to shift providers at will if you discover that a given carrier's performance isn't what you need and the easy ability to onsell the device if a newer and shinier model takes your fancy. Android handsets don't tend to keep their value quite as well as iOS handsets, but you'd be able to easily and reliably onsell from day one by buying outright, whereas going on contract can leave you with a network locked handset and the hassles that come with that. I rather deliberately used Telstra as the reference point particularly because they do charge a premium for their service. I have no doubt that Telstra would argue that it's worth it, but that mileage can vary markedly.
It doesn't follow that contract is the wrong way to go for absolutely everybody. There's an undeniable convenience in a single monthly payment over time, and if it's a business phone there can be tax implications regarding mobile phone costings and depreciation to consider as well. But with an increasing number of genuinely appealing mobiles being available for outright purchase only, it's worth doing the sums and considering your options before blithely signing on the dotted line.