Smartphone tariff bundling and customer relationship

The bundling of smartphone devices with a discounted mobile tariff plan has been a customer acquisition/lock-in strategy for many mobile network operators for some years. Larger incentives are offered to customers with higher average revenue per user.  The extended credit period usually runs for 2-3 years and monthly fees reflect these bundled deals.

A year is a long time in mobile telecoms and what seemed like a remarkably good deal last year may now look decidedly less desirable.  So customers that are “locked-in” to long term contracts in exchange for bundled deals may be paying increasingly higher tariffs relative to the Industry benchmark when they reach year 2 or 3.  Premature exit from the contract can also be prohibitively expensive.

Could this all be about to change?

The iPhone Upgrade Program announced in the US, allows customers to upgrade their iPhone each year or to buy the phone outright after two years. Price plans for the new iPhone 6s look competitive and includes insurance for accidental damage.

Where does this leave mobile network operators?   Apple’s move is a further move to distance subscribers from the network operators. In the absence of contracts and SIM-locked phones, the network operators could become simply the connectivity providers only.  It facilitates changing network carriers which is likely to have a significant impact on churn.

Only time will tell whether this will come to the UK.