Handset subsidies go as market reaches maturity

Vodafone New Zealand has removed all handset subsidies and Telecom is considering its position.

Vodafone New Zealand has removed all handset subsidies and Telecom is considering its position.

Cellphone handset subsidies are also on their way out in Australia with Telstra planning to reduce the subsidies by 20% this year and phase them out entirely early next year.

Vodafone New Zealand has already phased out subsidies on its handsets.

"[The amount of money saved is] in the order of millions," says Hamish Wilkie, Vodafone's general manager for the consumer market. He says the saved money will be spent on "delivering value into our services and our network rather than putting it simply into the handsets".

Wilkie points to the maturing of the market as the reason for the move.

"Customer growth is slowing as we reach that point where most people who want a phone have one, and we do have some customers with more than one phone which is also fine by us."

He says there will be a move to customers either buying their phones outright or perhaps using a financing option to spread the cost out over time as with the contractual situation Vodafone has used in the past.

"There will always be a number of different price points in the market and that's not going to change."

Telecom is also considering its position on subsidising handset prices. Telecom's national media communications manager Linda Sanders says subsidies help spread the cost of the phone for the consumer in the same way hire purchase works. "It helps lower the initial cost and spread it out over a number of months."

Sanders says subsidies have helped increase the number of cellphone users dramatically, but once a certain point has been reached it makes more sense to phase them out, or to introduce new pricing structures and plans.

"That's something we'll be looking at in the coming months."

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