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I’m going to lease an iPhone 4S from o2 this afternoon

Did you hear about o2’s new leasing programme for iPhones? It caught my attention because it’s almost something I’ve been banging on for quite a while.

My favourite operator innovation concept is that I just pay a flat fee per month and receive whatever device I want. The idea being that I finally divorce myself from the hardware. I don’t want to have to own anything. I want someone else to take the hardware responsibility. Just like I don’t own any servers any more. My businesses certainly use servers — mostly from Rackspace — but we don’t own them, maintain them, or have any responsibility for them whatsoever. I just buy the service. Rackspace deal with hard drive failures. [Or, actually, in most respects, everything is virtualised now so my company is never exposed to that issue any more.]

I’d like to do similar with my mobile phone hardware. I don’t want to have to keep on contracting for specific hardware that becomes out of date very quickly. I don’t want to have to arse about shopping around, negotiating and dicking about with contracts, up-front-payments, insurance, all that jazz. I just want it done. In one single fee, per month.

Interestingly, this is almost what o2 has introduced (full details on this page).

Here’s how it works:

The lease agreement is 12 months.

There is no hardware cost upfront so the phone is ‘free’.

Full insurance is included.

As a standard, you get 750 minutes, unlimited texts, 500mb data and unlimited wifi every month. (You can upgrade to 1GB/month for an extra £4.)

The phone is not yours. You do not own it. You’re obviously just leasing it. So at the end of the 12-month period, you must return it in ‘satisfactory condition’ or you ‘may have to pay substantial damages.’ Fair point. But remember insurance is included so if you drop the screen, they’ll sort it. It’s their handset, after all, not yours.

Now then that all sounds fairly reasonable so far, yes?

You’re probably going to take a step back from the screen when we get to pricing.

The 16GB iPhone 4S is £55/month. The 32GB is £65/month. And I presume the 64GB is ‘more’. It’s not listed on the screen though.

I think most readers will be reacting with shock and horror at 55 pounds per month.

But actually let’s remember:

1. This is for 12-months
2. It includes insurance (which is normally £12/month) or thereabouts

£55 x 12 months is £660.

The iPhone 4S 16GB retails at £499 from Apple unlocked, which leaves a balance of £161.

Now remove the £12/month insurance (£12 x 12 months = £144).

The balance is now £16. So the line rental is effectively £1.33 per month. If you follow my slightly warped viewpoint.

I know — I KNOW — I don’t actually own the phone. And across the year, I’ll have paid for the phone. And then 12-months later, I’ll have nothing to show for it. True. True.

But.

I don’t want the phone. I don’t want to have to try and flog it 12 months later when there’s a new iPhone (5) out.

I just want the experience.

I think it’s like buying and running a car: It’s expensive. It just is. It’s guaranteed to lose you money. You can, if you invest a TON of effort and time, minimise those loses a little — but it’ll still cost you money.

If you lease, it’s all up front. You’ve set your losses at a particular level. You’ve gone into it eyes open. There are no additional costs, everything is taken care of.

I think that’s what attracts me to the idea of leasing.

What’s the alternative? Well, sticking with o2, I can buy an iPhone 4S 16GB for £189.99 on a 12-month contract of £41/month. That gets me 900 minutes and unlimited texts (so slightly more mins than the 750 lease deal). That costs me: £189.99 + 12x £41 = £681.99.

It’s a valuable phone so I want insurance. 12x £12 = £144. Total cost across the contract? £825.99.

On fact value, that looks a lot more expensive than leasing.

BUT of course, after 12 months, I’d still *own* the phone if I bought it via standard contract. So I could theoretically sell the phone for at least £150, possibly £180. Maybe £200. If you assume I could flog the handset for £200, then actually, the costs are more or less the same.

Still. I like the idea of somebody else (effectively) managing my hardware. So I’m off to the o2 shop later today…

By Ewan

Ewan is Founder and Editor of Mobile Industry Review. He writes about a wide variety of industry issues and is usually active on Twitter most days. You can read more about him or reach him with these details.

9 replies on “I’m going to lease an iPhone 4S from o2 this afternoon”

“I don’t want the phone. I don’t want to have to try and flog it 12 months later when there’s a new iPhone (5) out.”

There’s a startup idea right there, make it easier for people to buy and resell phones. Because it’s a shame you can’t recoup some of your investment.

Up until this year O2 used to give business users an upgraded handset every year anyway at subsidised rates. Since the original iPhone I have had a new iPhone 3G, 3GS, 4 every year by renewing the original 18 month contract for an additional year. True I had to pay about £50 for the upgrade each year but the contract was only £45 per month with 1300 minutes, 500 texts (and unlimited data). This works out cheaper than then new leased scheme and I get to keep the handset at the end and sell it on (for about £250-£300 each time). If I damage the phone Apple charge £129 to replace the screen at the Apple Store and they don’t repair it, they give you an as new refurbished one there and then. If I lose or have the phone stolen, it covered under my house insurance at a far lower rate than £12 p/m. The old scheme was much better but unfortunately they stopped it a few months ago. Just seems strange nobody has mentioned this, but people think the leasing service is so great.

As far as I can see Ewan, you and a fair few of my friends back in the UK are the type of people that this is aimed at! Three have even got on to O2 to see if any hyper high end Android phones are to be offered in the same manner. As they said to me earlier, that what with CPU upgrades, OS upgrades and the general improvements in everything else, 12 months is just about the sweet spot for shifting from one Android device to the next. Especially if the lease sign-up period would be set to say two months for a certain Android phone before the next was shuffled in. And from the wording of that advert it seems as if O2 have considered that too. Several of them even said that £70-£75 a month with a lot more data thrown in and some more “O2 extras” would be OK for them as well.

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