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Vodafone becomes the first Australian telco to offer a four-year interest-free device repayment plan, halving monthly handset costs as phone prices exceed $5000, but consumer advocates warn of risks.
Vodafone will let customers pay off a new phone over four years, making it the first Australian telco to offer a 48-month device repayment plan as latest models can cost more than $5000.
The interest-free option, launched on Tuesday, halves the monthly cost of a handset. An iPhone 18 Pro 256GB costs about $88 a month on Vodafone's 24-month plan, and about $44 a month over 48 months.
Consumer advocates warn of long term risks
However, consumer advocates warn that the four-year commitment brings increased risk for customers stuck with ageing devices down the track. The top-line iPhone Duo is priced at $5899, putting it out of reach for many customers on conventional plans. Some handsets retail for more than $5000, with Apple's new foldable phone priced at around $3500 to $5900, depending on storage space.
The telco said its own data showed the proportion of customers using a phone four years or older had doubled since 2021. Australians are holding on to their phones for four years or more, but until now they have not had the repayment options to match, Vodafone acting group executive consumer James Gully said. The telco industry has not moved, so we are moving first.
Asked whether smartphone prices had become too high, Gully said the plan was a response to how customers behave. We do not control the pricing decisions of device manufacturers, but what we can do is give customers more ways to spread the cost of a device over time, he said. Vodafone, owned by TPG Telecom, previously offered 12, 24 and 36-month terms, and was the first Australian telco to introduce a 36-month option in 2017.
Half choose longer repayment option on launch
More than half of the customers who bought a handset on launch day chose the 48-month term, Vodafone said. More than half of the customers who bought a handset in the first hours after the plan launched on Tuesday chose the 48-month term, Vodafone said. Customers who leave early have the remaining device balance added to their next bill.
Gully said the same credit checks and hardship processes applied as on existing plans, and Vodafone did not expect any particular income group to favour the longer term. The four-year term also raises questions about software support, as some Android manufacturers do not guarantee security updates for that long. Gully said software support was a matter for manufacturers and pointed to more capable devices and cheaper battery replacements extending the life of handsets.
Consumer body criticizes current credit protection rules
The peak telecommunications consumer body, the Australian Communications Consumer Action Network, said the credit rules telcos had operated under were written by industry and had failed to protect consumers. Australia's communications regulator is in the process of replacing them with an industry standard, and ACCAN said it was concerned the draft rules still would not adequately protect consumers.
We need to see those new rules uplift the checks and balances that telcos are required to undertake to ensure that consumers can afford the full commitment, not just the monthly repayment, said ACCAN head Carol Bennett. With a four-year commitment, there comes an increased risk for customers. They are on the hook for longer, holding a device that is ageing, losing value and battery life, but payment amounts do not change, she warned.
However, most new phones from major brands would receive updates for longer than four years, she added. Optus, which offers repayment terms of up to 36 months, has focused on reducing upfront costs rather than stretching repayment periods. Telstra has been contacted for comment. Whether rivals follow was a matter for them, Gully said.
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brisbanetimes:This story was compiled and edited by the HeadTopics newsroom and HT AI from the reports above.
Australia Telco Device Repayment Smartphone Affordability ACCAN Consumer Warning TPG Telecom
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