Smartphone contracts are an attractive proposition for South African customers, as they can usually get a high-end smartphone at a cheaper rate than prepaid while bundling their data and airtime costs into a monthly package.
The only downside to this model is that you are locked into monthly payments to your mobile operator for a fixed period – most commonly 24 months.
After this period expires, you may be able to continue on a month-to-month plan with a revised payment, or you may be required to upgrade to continue on a contract plan.
Many users prefer to upgrade so that they can get the latest smartphone models available, but this locks them into another 24-month contract.
If for any reason you need to cancel a contract which is still valid for a significant period, it may prove quite expensive depending on which mobile network you signed the agreement with.
Cancelling a contract
The Consumer Protection Act (CPA) prevents companies from unfairly punishing customers for cancelling contracts, but there is still a lot of room for the operators to impose payment on customers.
Specifically, the CPA states that mobile networks can only charge a “reasonable penalty” for cancellation, prohibiting them from charging the full amount owed.
This “reasonable” amount is left to the discretion of the mobile networks, however, and can vary depending on which operator you have a contract with.
MyBroadband asked local mobile operators who offer fixed-term contracts how much customers are required to pay if they choose to cancel their contract before the period is up.
We also asked mobile networks how their cancellation rules are reconciled with the “reasonable penalty” requirement of the CPA.
MTN said that when customers cancel an active contract, they will need to pay for one month in addition to the remaining amount outstanding on the included smartphone.
“MTN charges one month’s service subscription plus the remaining value of the handset and the previous month’s usage charges if applicable,” MTN said.
The company added that the month in term at which customers cancel is the biggest factor affecting the cancellation payment.
“This determines the remaining value of the device to recover plus one month’s service subscription plus the previous month’s usage charges, if applicable.”
MTN said it charges less for cancellations than other mobile networks.
“MTN’s cancellation penalties are less punitive than other operators in the market,” MTN said.
“The recovery of the hardware costs plus one month’s service charge (which is still consumed by the customer at the point of cancellation) is deemed fair and reasonable.”
A Vodacom spokesperson told MyBroadband that the network charges customers 75% of the balance of their contract.
“Vodacom charges customers a reasonable premature cancellation cost of 75% of the balance of the customer’s contract which is set out in our terms and conditions (clause 4.2),” the network said.
“The cost is based on the factors set out in Regulations 5(2) of the CPA.”
“The balance of the contract is the customers’ monthly subscription amount, multiplied by the remaining months of the contract,” Vodacom said.
Vodacom added that it also considers the duration of the agreement that the consumer commits to, in the case of a Vodacom cellphone contract – generally a 24-month period.
Additionally, any amounts outstanding to Vodacom will also be added to the cancellation cost.
Cell C said its customers must pay for the remaining value of the handset at the time of cancellation as well as the current invoice when cancelling their contract.
“It is important to note that out-of-bundle usage is charged in the month after such usage is incurred, therefore there is a settlement invoice and then a further invoice to collect these additional charges,” Cell C said.
Cell C said its current practice is not to charges any penalties over and above the charges the client is liable for, thereby conforming to the “reasonable penalty” rule as set out by the CPA.
MyBroadband reached out to Telkom for comment but the company did not respond by the time of publication.