Are two-year cellphone contracts in South Africa going to die?

Mobile operators in the United States are dropping cellular contracts, and, according to reports, focusing on month-to-month tariff plans with phone repayment plans.

Sprint is the latest major network in the US to make this move, with The Wall Street Journal reporting that it plans to stop offering contract phone plans by the end of 2015.

T-Mobile, Verizon, and AT&T have also moved away from contracts and towards smartphone payment plans.

This lets the operator keep customers on a product that resembles a two-year contract, but affords subscribers the ability to cancel their service and change plans when they want.

This is not a new concept in South Africa – FNB, Absa, and Standard Bank offer their clients deals on smart devices and other electronics.

However, our mobile operators have been slow to adopt this approach and still bundle a tariff plan with your phone contract.

SA networks and two-year contracts

Vodacom said it doesn’t have any plans to stop offering current two-year contracts.

“Having said that, we are constantly watching local and international trends and updating our product offerings to make sure we offer the best value,” said Vodacom.

Cell C said the new US model is effectively what it employs, as customers only need to pay for the handset and the outstanding usage if a contract is cancelled.

Cell C said the payment plan model used internationally worked well, and it was “inevitable it will happen here”.

The operator added that handsets represent a massive overhead for mobile companies. “Having an alternative financing model is essential for operators globally to remain competitive.”

MTN and Telkom did not respond to questions by the time of publication.

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