How Cell Phone Contracts Work

How cell phone contract workConfused when it comes to cell phone contracts?

You are not alone…

Sit down, get comfortable, we are going to be here for a while. Let me explain how cell phone contracts work.

Ok, seriously, this will not take too long…

If you are completely new to the world of cellphones, the sheer number of choices and options can be extremely overwhelming. By this stage, most people have had a phone for a while. Some will have been on prepaid and others would have gone the contract route.

There are pros and cons to both options.

Here we will be looking at contracts. The beauty of a contract is that the phone is highly subsidized or even free if you don’t go for a top of the range option. You agree to sign a 24-month contract which will be paid monthly, generally by debit order.

There are 4 networks to choose from:

They all offer voice and data contracts.

Data Contracts

A data contract is for use in a data device such as

  • a modem
  • router
  • directly in some laptops or a tablet
  • and will be (or should be) used exclusively for data use.

There are two types of data packages to choose from, an open-ended package and a capped or top-up plan.

The open plan gives you the freedom to use as much data as you need but could lead to an unexpectedly high bill.

There has been much debate for some time now over data costs in South Africa, particularly out of bundle rates. Just to explain that further, the open-ended data contracts range in price from as low as R50 to well over R1000.

The more you pay, the larger the size of the data bundle you are allocated for the month. Once that bundle has been depleted, you start to pay out of bundle rates. Although these have come down in recent years, they are still significantly more expensive than the cost of in bundle rates.

All networks have gone to great lengths to improve warnings and informing clients when they are out of bundle and how much they are spending. This still has a way to go before it is perfect but has reduced the incidence of bill shock where clients receive astronomical bills after using out of bundle data.

A safer option is to take a top-up data package.

Here you still receive a bundle which will vary according to the cost of the package you select. Once the bundle has been depleted, you will not be able to use any data until you top-up the account as you would with a prepaid card. This gives you full control but is slightly more expensive.
Voice contracts

There are a number of options when it comes to voice contracts. These are contracts you would use in a normal cellphone, normally a smartphone these days.

The popularity of smartphones means that most people use a fair amount of data on their mobile phones so there are very few purely voice contracts anymore. Most come with a combination of airtime for voice calls and data.

Applications like WhatsApp use very little data but other apps can use a lot more, as does browsing the internet and particularly downloading content such as music or videos.

Another option you have to consider is some packages offer a specific rand value from which your calls are depleted as you make calls while other plans offer a certain amount of free (inclusive) minutes per month. Much like the data packages, once you have depleted the rand value of inclusive minutes, you pay per call thereafter.

Voice contracts also come as open-ended packages or top-up options, much like the data options explained above. If you want total control of your account, go for the top-up option.

Some packages offer SMS bundles with the packages although a lot fewer people use SMS these days. One can also add additional bundles onto the options described above. If you need to use additional data, for example, you can add a data bundle onto the contract. This will give you a lower rate than the out of bundle rates. These bundles can be ad-hoc, i.e. Just for that month or bolted on, in which case they are there every month.

How to choose

I know that sounds like a lot of options but people have such diverse requirements, usage habits and budgets. The networks are trying to accommodate a wide range of requirements.

The first step is to consider home much data and voice data you will need in an average month.

If you have used a phone for a while, you should have some idea. If you have a specific network preference, look at their deals. Alternatively, shop around at all 4 networks to see who has the package and handset that best suits your requirements.

Additional costs

Apart from the cost of the monthly costs and any usage outside of your inclusive bundles, there are a few other costs you might incur. These could include the following:

  • Sim card and connection fee
  • Itemised Billing
  • Call Line Identity

These prices vary from network to network. These costs are sometimes optional and in some cases, mandatory.

Insurance is another cost…

This is generally optional but not a bad idea if you cannot specify the handset on your personal insurance. If you have to replace a damaged or stolen phone without taking out a contract, they can be extremely expensive.

Do not rush into any decisions. Do your homework, think about your budget and voice and data requirements as well as the handset you require. Shop around, look at the options and find the deal that will suit your needs best.


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