Competition Forces Israeli Carriers To Cut Smartphone Prices

Until two weeks ago, customers paid Cellcom Israel Ltd. more than NIS 4,380 in 36 installments for an iPhone 4S, far more than in stores. Today, they can buy the same smartphone for NIS 3,417, if they pay in cash or in three installments. Cellcom claims that the NIS 963 reduction was always available, but, wonder of wonders, it was disclosed to the general public only when the new mobile carriers entered the market.

Cellcom is not alone. For many years, the mobile carriers sold phones on 36-month installment plans, a method that locked customers into the company through monthly credits and a wish to complete the payment before buying a new smartphone.

Following the entry of the new mobile carriers, which do not always offer three-year payment plans for the sale of phones, the established carriers have adjusted their offers for cash payments. Nonetheless, the prices are often still higher.

Bezeq Israeli Telecommunication Co. Ltd. (TASE: BEZQ) subsidiaryPelephone Communications Ltd. recently changed phone prices on its website. It is now possible to buy phones for much less for cash or up to six installments. An iPhone 4S (16 giga version), which cost NIS 4,680 in 36 installments, has been reduced to NIS 4,210 in up to six installments, A Nokia C201, which cost NIS 1,080 in 36 installments, has been reduced to NIS 810 in cash.

Cellcom is also offering discounts on the list price for payments in cash or up to three installments. A Galaxy W, which is listed at NIS 2,844 on Cellcom’s website, has been reduced to NIS 2,160 in the new installments plan. The HTC Sensation XL, which cost NIS 4,285 in 36 installments, has been reduced by more than NIS 1,000 to NIS 3,250 in cash.

This morning, Orange franchisee Partner Communications Ltd. (Nasdaq:PTNR; TASE: PTNR) matched Cellcom and Pelephone, and is offering lower prices for payments in cash or in up to three installments: a Galaxy W, which cost NIS 2,305 in 36 installments, has been reduced to NIS 2,017; the iPhone 4S (16 giga version) is being sold for NIS 575 less – NIS 4,070 instead of NIS 4,645 – a reduction of 12%.

The price of competition

The three veteran carriers are trying to become alternatives to retail chains such as Bug, Best Mobile, hMobile, and Office Depot, which did not always offer 36-month installment plans, and therefore had lower prices for phones. The new payment method may make the monthly payment higher, but the customer knows the phone’s exact price, without imagining that it costs NIS 100, because that is what he or she pays each month. HOT Mobile Ltd., which began selling phones this month, is offering phones on 36-month installment plans at the same price as in a single payment.

Some of the carriers now claim that this payments model always existed, but, for some reason, was not promoted. The current method brings the carriers’ purchasing terms closer to the terms of electronics retail chains. On the other hand, the carriers have nationwide chains of outlets, replacement phone plans, and online software updating services, which will help them differentiate themselves from some of the retailers, or if not most of them.

{Globes/Matzav.com Israel}