Consumers should be wary of contract buy-outs, check the small print, and be sceptical of the “sweeteners” attached to the offer.
The warning comes from Aki Kalliatakis, managing partner of The Leadership LaunchPad – a consultancy that helps companies develop service-led strategies.
In South Africa, the buy-out concept is being pioneered by Cell C, said Kalliatakis.
He said that even though our operators enjoy earnings that top international averages, they still hike prices – even on existing contracts.
“No local player can claim to offer the world’s best service, but no matter how frustrated you feel, remember that switching contracts ahead of time can cause complications.”
While Cell C’s R10,000 buy-out “sweetener” seems tempting, Kalliatakis said it warrants a closer look:
- The R10 000 gift card credit on offer with this promotion does not apply in all cases.
- The consumer pays the upfront cost of cancellation with the current provider with no guarantee switch incentives will be as high as the consumer hopes.
- The company’s website carries a caveat that any value offered under the buyout scheme is “at their sole discretion”.
- This is a SIM-only promotion, and could mean a consumer who takes a new phone with the package might have to pay the full amount for the phone over 24 months.
“Contract-switching tactics are rarely sustainable. However, in tough economic times we may well see other companies adopting the buy-out technique to reclaim lost business and attack competitors,” said Kalliatakis.
In all cases consumers should look at the underlying value of the product or service and if the company has a long-term reputation for good service.
“Even if they put a tick in these boxes, read the terms and conditions carefully. Jumping from the frying pan into the fire makes no sense – especially if a new contract creates expensive, long-term obligations.”
Update: Cell C has responded to questions regarding Kalliatakis’ warnings.
Cell C confirmed that the buy-out amount (or value of gift card) is linked to the value of the Epic contract which ranges from the Epic 200 to Epic Infinity. Amounts will vary according to the value of the contract with the top-end package, Epic Infinity offering up to R10 000.
“A trade in of the customer’s current handset is also required and considered for the buyout proposition.We’ve been very clear in our communication to customers through advertising that they can receive ‘up to R10,000’,” Cell C said.
The following table summarises the contract buy-out amount each Cell C Epic contract qualifies for.
|Post-paid and hybrid package||Fee||Post-paid Buy-Out Value||Hybrid Buy-Out value|
On the issue of paysing the cost of a cancellation up-front with no guarantee switch incentives will be as high as hoped, Cell C said that customers typically enquire about the buy-out offer in store to find out what amount they will be eligible for, before cancelling their existing contract.
“We also encourage customers to obtain a cancellation quote from their existing provider in order to ensure the buy-out value covers the outstanding fee. Once we have received a letter of cancellation, Cell C will activate the account and present the gift card to the customer, who can use the card to settle their early cancellation fee (depending on the amount) or use it for whatever purpose they want,” Cell C said.
Responding to the warning that Cell C’s website carries the caveat that any value offered under the buyout scheme is “at their sole discretion”, the mobile network said that this is because the buy-out amount varies per customer.
“It is determined taking various factors into account including the Epic package selected and type of handset traded in,” Cell C said.
Kalliatakis’ last point that the contract buy-out is a SIM-only offer, is wrong Cell C said. “While SIM-only is one option, customers can also choose from any of our Epic contracts bundled with a handset at very competitive monthly subscription fees.”