The Rise of Cheap Phones and the Fall of Carrier Contracts

Read past the fold to find out how phone makers such as Xiaomi, Nokia and Google (technically, Google+an OEM building the Nexus devices) are changing the smartphone game.

Singapore – There’s a lot of hype in the air as Xiaomi launches its first ever phone in Singapore – the Xiaomi Hongmi (or Redmi). The SGD $169 phone sold out on Xiaomi Singapore’s website within 8 minutes of its launch.

If you’re a non-Singaporean and you’re reading this article, I urge you to continue, as it applies to you too. For one, you might relate to some of the things written here, and for another, you might better understand the plight of us tech-savvy Singaporeans.

Fanfare for such low budget phones have been rising in the past couple of years. Many Singaporeans have been going out of their way to get themselves a Nexus 5 that works with their local LTE network. The Moto G took the local market by storm when Brightstar imported the device here. And now, the ultimate budget phone, Xiaomi Hongmi, sells out within minutes of its launch.

It doesn’t take a professional smartphone  market analyst to realize what’s going on here on this little red dot – more people are switching to handsets that do not require them to be bound by a contract with a local operator.

But why the sudden trend?

In the past, there were plenty of perks for signing a contract with a telco. You get more free stuff, better service, and most importantly, handsets at discounted prices. That plus the hassle of topping up your prepaid card and  the few things that you can do with one (limited talk time, no data, etc.). Not sure how pay as you go (PAYG) plans work over in the US, but I know that they’re not carrier bound.

But now, things have changed. Telcos are becoming increasingly unreasonable with their contracts, with some of them forcing their customers to upgrade to data plans, and others simply demanding more money. But more importantly, carrier subsidies are becoming increasingly negligible.

Why pay $638 for a Galaxy Note 3 on contract (that’s right US citizens. That’s how overpriced the rest of the world is) when I can get myself a Nexus 5 for almost $100 less off contract? And more importantly, with the arrival of the $169 Redmi, why pay anything at all to the telcos when I can get a quad core phone with a great camera and amazing HD display for that little money?

Pretty expensive even with a contract...
Pretty expensive even with a contract…

Suddenly it all seems to make sense.

But how did it start?

My take is that it all started with Nokia and its success with the budget Lumia 520. The low end Nokia device took the Windows Phone market by storm when it first launched, with an overwhelming majority of WP handsets being the Lumia 520, helping Microsoft to gain its much needed market share in the smartphone arena.

With the success of the Nokia Lumia 520 and 525, other smartphone manufacturers likely decided to follow suit, pursuing the “next billion smartphone users”, as Google has put it. And with the introduction of Android 4.4 KitKat, phones with budget hardware don’t necessarily have to be stutteringly slow due to the decreased RAM requirements (it requires 500 MB of RAM to run now).

Budget phones are now an even larger factor in the smartphone market than flagship top-of-the-line models, partly due to the fact that the developing countries such as India and China, are growing markets. In developed countries, many people have smartphones, but in these poorer countries, the smartphone trend is only just catching on.

Nokia firmly believes in this as it unveiled its first line of budget Android phones dubbed the Nokia X family in MWC 2014 over at Barcelona. The trend of budget smartphones just isn’t going to stop anytime soon.

But that’s not it, is it?

But obviously people aren’t going to drop their contracts just because budget phones are getting less laggy.

Nope. It’s because budget (or midrange-priced, depending on your definition of budget) phones are now powerful as well. The Nexus 5 is a prime example of this. Then there’s the Xiaomi Mi3, a phone with identical specs to the LG G2 retailing for almost half the price of the G2. And the recent Redmi, a $169 phone with a near-Retina display and a quad core (though still pretty terrible, sorry Mediatek) processor. Anyway, that aside, the revised Hongmi 1s has a more beastly snapdragon 400 processor and Adreno 305 GPU and retails for roughly the same price.

Now arguably, the Nexus 5 is amazingly cheap due to low spending on advertising, and Xiaomi can do what it does as (let’s face it) they get everything done in low-cost mainland China. But if this trend keeps up, and if it keeps up long enough, sooner or later markets all over the world will be occupied with such smartphones that will probably be the demise of telco companies.

Nexus 5 - trio - black_575px

That’s it

Budget, low cost, yet pretty powerful handsets like the Moto G and Hongmi that can leave smartphone enthusiasts (who had stupidly paid $100 more for a phone on contract with identical specs) green with envy. That seems to be the future.

Believe me, if Google officially sets up a Play Store in Singapore which retails the Nexus 5 at the same price as it does in the US, there would almost be no one who would get another overpriced phone from the local telcos.

I think it seems that SingTel, Starhub and M1 better rethink their strategy.

And selling a $169 phone for $0 on a $39/month contract probably isn’t the best way to do it.

One thought on “The Rise of Cheap Phones and the Fall of Carrier Contracts

  1. So what if there is budget phones that Singaporeans can turn to get?
    Unlike places like USA which offers cheaper no-contract plans, it is not worth it to use a prepaid or a no-contract plan (which Singtel has some that charges a subscription fee as high as the equivalent 2yr contract plan). There is NO incentive for us to not contract unless you’re planning to change your phone in less than 2 yrs.

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