With so many mobile phone plans offered to you as a consumer, don’t you find it a big headache to choose? On one hand, you want the most value for money phone plan. On the other hand, you don’t want to be limited with your data usage. Many of you might be facing the same dilemma. And if you are facing the same dilemmas, this article might be the best replacement for aspirin!
Just by looking at the specifications of various plans you can choose from, it is still hard to make a fair comparison. Most of us would go for the plan that can give us the most “discount” from the phone’s retail price. But is that really how you should be comparing the phone plans?
Time value of money
Before you dive into comparing the different mobile plans, you need to first understand an important finance theory: Time value of money. The time value of money is simple in concept, but might take a while to fully understand it.
So, let’s start with a few basics. First, you need to comprehend that money available now is worth more than the same amount in the future. Second, money can earn interest. Thus, S$1 should be worth more than S$1 a year later.
Let’s use a simple example for illustration. Imagine that your boss is giving out a bonus to you, e.g. S$3,000. Would you rather he/she gives you S$3,000 today or S$3,000 a year later? Logically, you would choose S$3,000 today since it is the same amount you receive now or a year later. But what if your boss offers to pay you S$3,000 today, or S$3,300 a year later? Now the real dilemma comes, isn’t it? This is because your S$1 today is now worth S$1.10 a year later.
Looking at mobile plans using time value of money
So, you might be asking, “What does this have to do with mobile plans?”. While it is uncommon to compare mobile plans using time value of money, the concept is great at helping you decide all sorts of money matters.
In order to do a fair comparison, we compare the total cost of ownership of owning an iPhone X on all four telcos. We also assumed an arbitrary interest rate of 10%.
1. Singtel’s iPhone X 64GB
We use Singtel’s Combo 2 plan (with x2 data add-on) for comparison with the other telcos.
With the x2 data add-on, Singtel’s Combo 2 plan offers 4GB of data usage. Under the plan, you will have to fork out S$53.80 per month throughout your 2-year contract (S$42.90 + S$5 + S$5.90). Sum that up and you’re expected to pay S$2,399.20 over the course of 24 months.
When you look at the present value The overall cost of ownership in its present value for an iPhone X 64GB under Singtel’s Combo 2 plan is S$2,278.93 (excluding GST for monthly phone bills).
2. Starhub’s iPhone X 64GB
In Starhub’s case, we use their XS plan for comparison.
Starhub’s XS plan offers 4GB of data usage for $48 a month. Under the plan, you will have to fork out S$53 per month throughout your 2-year contract with them (S$48 + S$5).
The overall cost of ownership for an iPhone X 64GB under Starhub’s XS plan is S$2,214.52 (excluding GST for monthly phone bills).
3. M1’s iPhone X 64GB
For M1, we use their i-Reg plan for comparison.
Like Starhub’s XS plan, M1’s i-Reg plan also offers 4GB of data usage. However, M1’s i-Reg plan is more expensive, i.e. S$67 a month (S$62 + S$5). But with a more expensive plan, you can save on the upfront mobile upgrade cost. Under M1’s plan, you only have to fork out $920. But overall, the cost of an iPhone X 64GB with M1 is the most expensive among the four telcos.
4. Circle Life’s iPhone X 64GB
Last but not least, it is Circle Life. For Circles Life, there is only one plan for comparison. To make it a fair comparison, the free incoming option (S$2/month) was added. This brings the monthly phone bill for Circles Life to $30 a month. Circles Life do not offer any phone subsidies upon signing of any new phone plans. Thus, you will need to pay for your iPhone X 64GB in monthly instalments. The monthly instalment is $68.67 per month.
Adding all the monthly phone bill and instalment costs, the overall cost of ownership for you is only $2,147.51. This is despite having no phone subsidies from Circles Life.
Telcos’ phone subsidies is a way to lock you in
While telcos have repeatedly used this trick to lure consumers into signing long-term contracts with them, many of us failed to realise that. Placing too much emphasis on getting a phone subsidy would have compelled you to go with M1’s plan, however, our little experiment above shows that not getting any subsidy, but being able to defer the initial payment over a 24-month instalment plan is a more economical option.
Now that you know you can look at mobile plans using time value of money, don’t let the telcos lock you in. Find the most value for money deal based on your mobile usage needs. Don’t let the “phone subsidies” trick you again!