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December 10, 2016

SIM only and SIM free - a changing world

A few years ago, when you wanted a mobile phone you’d go to one of the numerous shops on your high street, you’d look at the offers and then buy either a Pay-as-you-go handset or sign up to a contract for 12, 18 or 24 months and get, more often than not, a ‘free’ handset, as long as you committed to pay the line rental for the minimum period. Then once your contract was about to expire the network operator or the retailer would get in touch and offer you a new ‘free’ handset to extend your contract and commit to another period.

However, now that handsets have been edging up in price over the last decade that simple model has changed. Also, what has changed is the way people use their mobile. No longer do people call and use texts as much. These were the big revenue generators for the network operators. Now that the internet is pretty much a fixture on most handsets people now use OTT providers (Over the Top) messenger services that are often free, such as WhatsApp and Facebook messenger for text based messages or Skype for calls using the internet.

Faced with higher hardware costs and reducing revenues from calls and texts the network operators have had to respond. Their old message – ‘Get a free phone on a 12 month contract then upgrade’ was simply out of date and more importantly it was not making them the revenues they needed. Whilst you can still sign up to a ‘subscription offer’ the free handsets have either disappeared or are of poor quality and the line rentals are much higher than a decade ago. They also had to respond to some MVNOs who were popping up offering SIM only deals that were dirt cheap and a great option for those who owned a working phone and wanted a cheap way of running a mobile. It’s now possible to pick up a good SIM only deal for £10 a month with minutes and a load of data included. Companies such as GiffGaff were essentially a mobile network with no phones. It is possible to buy phones from GiffGaff nowadays but they are completely separated from the SIM deal.

A simple enquiry on your favourite search engine for ‘SIM only deals’ brings up hundreds of different options now offered by all the network operators and a myriad of operators such as Plusnet, BT mobile, Tesco, Virgin, etc I could go on. Alongside this there is now a massive market in second hand reconditioned mobiles to provide the budget conscious with plenty of options.

Apple have begun to offer payment instalment plans completely apart from the SIM card. For example, if you want to buy a iPhone 7 256 GB for a cool £799 you can pay over 24 months at £38.35 a month, which means you’ll pay a total of £920.41 over the 24 month period. Disappointing if it is stolen on day 1.

The network operator who has been boldest in trying to retain customers but essentially split the relationship between the handset and the SIM deal is O2. They offer O2 Refresh which is a way of allowing customers to upgrade early by trading in their existing handset. The bills customers pay are split in two. Half the monthly bill covers the cost of the device and the other half covers the actual call, data and texts. This is all well and good however, it does depend on having a handset to trade in.

The next few years will be fascinating to watch. If the price of handsets begins to edge downwards then we might see more changes there is some evidence of this from the lesser manufacturers such as LG and Google who make great phones and want to grab market share.

As it stands 2017 could be big year; with the return of Nokia to offering hardware, the move to 5G services and of course the small matter of the iPhone’s tenth birthday.

However you buy your new mobile you can insure it here at Insurance2go.