Tuesday, November 30, 2010

Aren't mobile phones supposed to be free? Not anymore.

Earlier this month, Sun Cellular claimed to have breached the 1 million postpaid subscriber base this month, which is more than Globe Telecom's 980,000 postpaid subscribers and Smart Communications has more than 400,000 postpaid subscribers. I took little interest as to who was winning this war. What was shocking is how few postpaid subscribers there are in the Philippines.

The Apple iPhone 4. Probably the most 
desired mobile phone in the Philippine market today.

With a claimed 15 million user base and only 1 million on postpaid plans, this means that only 1 in 15 Sun Cellular subscribers are on postpaid. In the case of Globe Telecom it is actually worse-- of a claimed 25 million user base, only less than 1 in 25 is on a postpaid plan. In the case Smart Communications, of a claimed 44 million users, only about 400,000 are postpaid subscribers. That's about 1 in 110. These number raised only one question in my mind. Aren't cellular phones supposed to be free?

I have been a postpaid subscriber in the 14 years that I have owned a mobile phone. For the most part I have been on two year contracts, and at the end of two years, I sign up for another two years and get a new phone. In the early days, before the "retention privilege," I actually held on to an old Globe Telecom Nokia phone for almost five years, and three batteries. Back in 2002 or 2003, when I applied with Globe Telecom at EDSA Shangri-La for retention, my Php1100-Php1,300 usage per month did not qualify me for retention (back then you had to average Php1,800 a month). On my way out of Globe Telecom's center a Smart Communications agent asked me if I wanted a new mobile phone. I was happy with Globe Telecom's service, but agreed to change my cellphone number in exchange for a new free phone. In 30 minutes Smart Communications got me an HTC Smart Amazing Phone on as Addict Plan 1200.

Samsung i9000 Galaxy S 8GB. At a bit over Php30K it is widely considered to 
be the bang for the buck choice among the creme-de-la creme of mobile phones. 

I grew up with this industry expecting that mobile phones should be free. In fairness, when I did break (dropped) my  phone in 2005, I did buy a Nokia 6600. I do not remember how much I paid for it, but by then it was an old model and I remember I got a very good price on it. The only other time I bought a mobile phone was in 2009. My wife's phone started having problems, I gave her the phone I got on retention, a Nokia E75 and kept my Nokia E61i. Later that year, I replaced my Nokia E61i with a Samsung B7320 Omnia Pro, which cost all of Php13,700 and got on a six month zero interest plan. That is the most my wife and I have spent on a mobile phone-- Php13,700 spread over six months. Between me and my wife, of the eleven or so cellular phones, we only bought two, and only because we had to replace damaged units we got under retention plans.

In fairness, we did buy four or five mobile phones, in the past few years  to give to our office staff or as gifts to family members.

At just over Php25K, the HTC Desire is our own personal favorite, even if it 
lost its AMOLED display. It still has the high resolution (480 x 800) display,
 the 1GHz processor and 512MB of RAM to run with the big boys. Internal storage
 is only 512MB plus a 4GB Micro SD card, versus the built in 8-16GB that you find in its competitors.
 It costs as much as Samsung i9000 8GB, and the Samsung which does have a better AMOLED display hence is losses out in the bang for the buck category to the Galaxy S.
I guess, the entire point of all this is aren't cellular phones supposed to be free? Apparently, the answer is no. Most people do not avail of the free phones offered by the telecommunication providers and buy their own phones. Out of 84 million subscribers, only 2.4 million are postpaid. If we are to assume that phones given to postpaid subscriber has a useful life of 4 years and wind up in the second hand market (2 years with the original owner and 2 years with the second owner), this means that maybe about 1 in 20 phones in the Philippines was acquired as part of a postpaid plan. That is a lot of phones being bought. 

Smart Communications "answer" to 
Globe's iPhone 4. Getting one will cost you a bit more than
 getting an iPhone 4. This one is going to be a tough sell.

Why buy a phone, when you can buy consumable plans and get a free phone? I have a friend who bought a mobile phone for Php47,000 when his annual cellular phone bill is only about Php6,000 per year. It is simple really, we all have our vices. A mobile phone is a status symbol. I really could not subscribe to this idea before, but today's smartphones are getting so advanced, I myself can see the point.

It is not just a phone anymore. It replaced expensive PDA's of a long time ago, then it saved you the cost of buying a small low cost camera, made an MP3 of MP4 player redundant and now you don't even need to buy a PSP or even a small netbook or tablet to carry around for surfing the web. When you add up all the items that a mobile phone could replace, an Apple Iphone4, Samsung Galaxy i9000 or HTC HD 2 are not really as expensive as they seem. So even if you are not a power user entitled to a free high end phone, there are plenty of reasons you can use to justify purchasing a high end phone.

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