Weariness And Hope Over Cheaper iPhones

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EDITORIAL

Weariness and hope over cheaper iPhones

The Nation

Are price cuts a reason to celebrate, or just déjà vu?

BANGKOK: -- Some may say it's still a wishful thinking to assume that a "consumers' market" is around the corner when smart phones are concerned. True Move's unexpected price cuts on iPhone 4 and iPhone 4S have generated excitement and speculation about a price war, but optimism so far has been cautious at best. When it comes to hi-tech gadgets, customers have always been chasing shadows, believing one minute that they have struck the best deal, only to pull their hair in total dismay the next.

Will it be different this time? A news web site calls True Move's discounts a heart-breaking promotion. To a large extent, the decision to slash the prices of iPhone 4 and iPhone 4S will upset many early-adopters of both iPhone versions. Does that sound familiar? Now, those who decided not to buy early have become a subject of envy, but it's hard to conclude that they are a lucky bunch. Even if they are really lucky now, nobody stays lucky for long in a world where "smart phones" can look stupid in a matter of months.

Sceptics have pointed out at the conditions attached to dramatic discounts that go as high as 50 per cent. Buyers of the iPhones on cheap offers will be bound by obligatory service fees spanning 18 months. This has prompted many to argue that while you can buy iPhone 4 and iPhone 4S on the cheap, you will have to spend a lot of money with True all the same.

Why is True appearing to be very generous all of a sudden? There are a few possible reasons. Telecom giants have been very conscious about customer relations and True Move has kept itself at the front line on this. Yet business factors could be the motives that really matter. In their immediate reaction to the price cuts, market analysts think True Move may have overstocked the two iPhone versions and their sales may not have been as good as projected.

Sales that are not meeting targets would be enough to motivate a price reduction. To add to that, the smart phone market is dictated by imminent or anticipated arrivals of a new product. In case of iPhones, a major discount naturally leads to speculation about the imminent arrival of a new version, or iPhone 5 to be exact.

Some analysts believe that, apart from sale figures, the stagnation of post-paid subscription as opposed to the growth of pre-paid users may also have encouraged True Move to try to commit its customers to long-term relations. Selling iPhones at expensive prices may mean big, instant profits, but True Move may prefer long-term and stable stream of incomes.

Last but not least, there may be a technical reason behind True Move's decision. Its current cellular concession is expiring late next year and it may make a good business sense to start shifting customers' base to the 3G landscape. Cutting iPhone 4 and iPhone 4S prices while binding buyers to long-term subscription may serve that purpose.

Keeping its customers will benefit a company that is trying to make the best out of services that can be converged or are already converging. It is noticeable that one condition for buying cheap iPhone 4 and iPhone 4S is that the buyer must be a subscriber to True Vision or True Online.

To real iPhone admirers , the offers may be hard to resist. Despite the attached conditions, True Move's iPhones will still be cheaper than those sold by its competitors. This alone may be the deciding factor. Unless, of course, True Move's rivals decide to turn it into a fierce price war or iPhone 5 comes to town early.

We have come a long way from the times when land-line telephone numbers were as valuable as gold, or when mobile phone users were forced to pay Bt500 in monthly retention fees. Considering the prices of "ancient" cellular phones, what iPhone can do makes it feel like a bargain at around Bt20,000. The only problem for consumers _ and it's a big problem _ is that someone somewhere is making them keep buying, and there's nothing they can do about it.

-- The Nation 2012-02-20

[lomatopo]

Yes, this is the first hardware subsidization I've seen here. There have been tie-ins before, where the hardware is not discounted but the services are.

The excess inventory postulation is interesting but I think TrueMove H are desperate for customers; they promised some pretty high figures and are way behind, even as their network build-out is ahead of schedule.

There was a longish line at the TrueMove shop in Central Rama 9 Saturday morning, maybe ~ 50 people (49 were female if that means anything?) queued, but not sure if it was for this promotion?

edited to add: I guess the pre-payment of seven months of service at 899 baht (963 with VAT) baht covers any HW discounting?

Edited February 20, 2012 by lomatopo

[tragickingdom]

Discount or not. It is always a BAD deal when you are a True customer. Lousy service, bad coverage, both Edge and 3G hardly working upcountry. Better pay more and stay your own master. If you do not have the money for a new iPhone buy them second hand it makes much more sense than becoming a True customer.

[orang37]

New iPhones on the way in the next few months; excess inventory. No surprise here in this marketing move.

[Stjohnm]

Discount or not. It is always a BAD deal when you are a True customer. Lousy service, bad coverage, both Edge and 3G hardly working upcountry. Better pay more and stay your own master. If you do not have the money for a new iPhone buy them second hand it makes much more sense than becoming a True customer.

So True (no pun intended) I have to be on DTAC as they are the only ones who offer coverage in our house up country

[FarangKenStine]

I'm holding my breath for the iphone 6 .

[rotary]

Sounds like the same scam the USA mobile phone companies use. Sell a phone cheap or even give you a phone but lock you in for several years so that really that cheap phone was expensive.

[rotary]

Sounds like the same scam the USA mobile phone companies use. Sell a phone cheap or even give you a phone but lock you in for several years so that really that cheap phone was expensive.

[belg]

the chinese factory workers at foxcomm are mostly free work labour (stagiair) learning the job, so called and working for free for their internship... apple get the cheap production costs and sell a cheap item for maximized profits... not to me... there is enough competition out there (samsumg? blackberry ?) ... that would not want me to pay 20.000+ baht for a gadget

[Sailfish1]

Can somebody please post the dscount prices and the required subscription costs? I cannot find them at the True Move site. Thanks.

[lomatopo]

^ I meant to post the links but got distracted...

http://www.truemove-h.com/iphone.aspx

http://iphone.mythailandblog.com/2012/02/true-offer-up-to-50-discount-on-iphones-in-thailand/

And it looks like there is this trade-in and up promotion for existing 3GS customers: (in Thai) http://www.truemove-h.com/en//hightlight_iphone4sdetail.html

Maybe they do have too many 4S's on hand?

[mogandave]

the chinese factory workers at foxcomm are mostly free work labour (stagiair) learning the job, so called and working for free for their internship... apple get the cheap production costs and sell a cheap item for maximized profits... not to me... there is enough competition out there (samsumg? blackberry ?) ... that would not want me to pay 20.000+ baht for a gadget

So Blackberry and Samsung pay their Chinese workers a lot better then Apple?

[nikster]

Sounds like the same scam the USA mobile phone companies use. Sell a phone cheap or even give you a phone but lock you in for several years so that really that cheap phone was expensive.

Of course it is... although people in Thailand haven't fallen for it so far and may not fall for it. The reason it's such a scam is not that the subsidy model per se is bad - it's that you can't buy any phones unless subsidized, so you got an automatic high interest loan with your phone. In Thailand, most phones are still sold unsubsidized so there is healthy competition and good prices for subsidy-free phone plans. If I bring my own phone in America - too bad, I'll have to pay the same (very high) monthly fee as customers who got their phone for free. I am paying back the subsidy even though I didn't receive one. *that* is the scam.

If they offered expensive subsidized plans, and cheaper non-subsidized ones, or God forbid if they broke out the subsidy payback from the service fee then it would be fair business. But of course they don't. They will tell you you will get a free phone out of the goodness of their hearts, and everyone pays the same monthly...

"heartbreaking discounts" - please. I would think that a newspaper editor could get their head around the subsidy model?! It's not that hard, The Nation.

Edited February 23, 2012 by nikster

[nikster]

^ I meant to post the links but got distracted...

http://www.truemove-h.com/iphone.aspx

http://iphone.mythai...es-in-thailand/

And it looks like there is this trade-in and up promotion for existing 3GS customers: (in Thai) http://www.truemove-...ne4sdetail.html

Maybe they do have too many 4S's on hand?

Why not do the math? (Whoa they made the 4S cheaper, it's 20,900 now at store.apple.com/th !!)

Unsubsidized: iPhone 4S 20,900. Monthly 3G plan from True 599/month.

Subsidized iPhone 4S 13,500. Monthly XL (almost the same as the 599 plan) 899. 18 month contract lock. 300 more per month x 18 = 5,400.

Total cost for the 4S: 18,900. Savings BHT 2,000.

Still a good deal... I guess it's worth 2000 baht to them that you stay with True for 18 months. They cleverly took advantage of a price reduction to make it seem an even better deal. Marketing...

What I didn't know: Apple is getting aggressive with the pricing in Asia. Good move as Android / Samsung provide some stiff competition and Apple's iPhone profit margins are ridiculously high. Too high.

True is selling the unsubsidized 4S 16 at 22,450 whereas the Apple store has it at 20,900.

I don't think they have too many at hand, but the shortage has disappeared and so they can now market the thing like they market any other device. Can't do that as long as demand outstrips supply.

Edited February 23, 2012 by nikster

[lomatopo]

I don't think they have too many at hand, but the shortage has disappeared and so they can now market the thing like they market any other device. Can't do that as long as demand outstrips supply.

Well TrueMove H is not really in the business of flogging hardware, although arguably they do make a ~ 12% top line revenue on "product sales" (but not so much GM so I suspect they pay a lot for iPhones), unless of course they have excess inventory. And this represents a quantum shift in how hardware is discounted and bundled with services here, so they are doing something new.

This is more about increasing ARPU, which has been falling over the past two quarters, reducing churn, increasing net-adds, strengthening brand loyalty. This promotion requires that you be a longer term customer in good standing on the DSL or TV side of the True house, so evolves consumers into the triple-play fold somewhat holistically.

TrueMove/H is lagging in signing up the number of mobile broadband subscribers they committed to. Now maybe they were waiting for the network build-out to each a certain percentage of coverage, or this is just one of the many somewhat coordinated promotions (some significant discounting on 3G data packages) timed for Q1? Who knows? I think they announce Q4/2011 and full year financials today so we should be able to glean some direction from those?

Anyway this promotion seems to be a decent deal for consumers, their initial outlay is 20,241 (13,500 + (7*963)) with no variable costs for seven months, vs. 20,900 (does that include-VAT? or whatever the price might be from the various channels here) and choosing any service provider /plan which might meet your requirements and cost less. Assuming you qualify for the promotion then each individual would have to do the "math".

Edited February 24, 2012 by lomatopo