Galaxy S5: sweeter on contract

Consumers can save as much as 30% on the cost of a Samsung Galaxy S5 by shopping around for a good contract deal.

---

South Africans wanting to get their hands on Samsung's latest offering - the Galaxy S5 - will save as much as 30% on the cost of the phone by taking out a contract, but will find themselves locked out of promotional offers as price wars continue.

In addition, once the regulator has finally wrapped up mobile termination rates and implemented a three-year glide path, handsets will become even more attractive on contract deals. This is as operators seek to secure their clients for two-year deals, in the hopes they will use out-of-bundle offerings, and keep on renewing.

The bulk of South African subscribers - 55 million out of 70 million active SIM cards - are on prepaid contracts. However, the churn in this segment is very high and it offers no security of annuity income.

Vodacom's offer for the Samsung Galaxy S5 LTE, based on information on its Web site, works out to an effective 30.6% discount on the handset when the value of the network services is taken into account.

Cell C's advertised offer effectively drops the cost of the phone by 23.5% over a two-year period, compared with buying it outright, based on Samsung's recommended price of R10 200.

Similarly, Telkom Mobile offers the handset at R449 a month, which is just R24 a month more than buying the phone outright, but also includes 100 minutes, 150MB of roaming data, 2GB of Telkom Mobile data, and the 'five for 50' SMS promotion.

MTN offers the handset on its My MTNChoice 100 for R489 a month over two years, which includes 100 AnyTime minutes, 100 SMSes and 300MB of data.

Ovum analyst Richard Hurst says consumers are losing out if they buy the handset outright and opt for a SIM only, or prepaid, deal because mobile operators are looking after their contract bases.

Operators are seeking to lock in contract customers as competition intensifies, says Ovum analyst Richard Hurst.

---

This is especially so in a hyper-competitive environment, Hurst adds. He notes, with lower mobile termination rates on the horizon, such deals are a way of locking consumers in for two years.

The Independent Communications Authority of SA (ICASA) recently had its new termination rates, which drastically cut the cost operators pay each other to carry calls - declared illegal. However, until new rates come into effect in October, MTN and Vodacom will pay Cell C and Telkom Mobile 44c a call, while the duopoly will only earn 20c.

Hurst says, once ICASA has determined new rates, operators will offer more attractive deals to lock in consumers, and steal each other's bases. Yet, he notes, inking these deals also means consumers will not benefit from competitive moves in the prepaid market.

Galaxy S5 contracts at a glance