Background Information to 12 Months Free Line Rental Deals
In order to properly understand how 12 month free deals work, consider how the mobile phone industry operates.
- Mobile phone retailers earn commission from the network providers
- Retailers cannot control the monthly contract fee charged by the network
- Retailers have a high profit margin on mobile phone sales
- Mobile phones are one of the most competitive retail products
So, retailers are competing for sales of a product over which they have no control. Specifically, retailers have no control over the monthly fee charged by the network providers.
So, how do retailers compete in order to obtain more sales?
As retailers cannot reduce the month fee charged by the network providers, they incentivise contracts with:
- Free or discounted mobile phone handsets
- Additional free gifts such as Ipods, Laptop computers
- Instant cash back (automatically refunded to customers)
- Cash back buy redemption (must be "claimed" by the customer)
What these retailers are doing giving part of their commission back to customers in the form of incentives that offset the monthly cost of the contract.
So what is a "12 Month Free Line Rental Deal"
As already stated, mobile phone retailers have no control over the monthly amount you pay to your network provider.
A 12 month free line rental deal is actually a cash back by redemption deal where 100% of the total cost of the contract can be claimed back.
So, is the description "12 months free line rental" misleading?
Yes it is. You still have to pay your mobile phone bill (line rental) as normal, every month.
Only if you claim your "cash back by redemption" will the cost of your contract be covered.
Up to the point you claim your cash back by redemption you will be "out of pocket".
If you fail to claim your cash back by redemption, you will lose money on your phone.