Tesco Mobile, the 50:50 joint venture between Tesco and O2, claims it is bucking the trend by offering customers shorter, 12-month contracts on all tariffs and plans plus a range of longer term contracts.
According to research conducted by Tesco Mobile, many mobile users feel uneasy about long term financial contracts and are frustrated by the lack of choice on mobile contracts.
It found a quarter of mobile users don’t want a long term tie in to their handset but felt there were few alternatives to 18- and 24-month deals.
The mobile industry has recently shied away from shorter term contracts and 12-month mobile phone contracts are in decline. This is despite the fact 38% of people felt their handset is considered out of date within a year of their contract start date, the Tesco Mobile research found.
In May 2008, 12-month contracts accounted for 13.4% of the market versus 83.4% for 18-month contracts and 3.2% for 24-month contracts.
However, within a year, 12-month contracts accounted for just 2% of the market, 18-month contracts had a 39% share but 24-month contracts had taken a 59% stake.
This trend has been fueled by the rising availability of expensive smart phones, which are generally only available on a long term contract.
However, Tesco Mobile found that one in four would opt for a shorter term mobile contract if they were more readily available as 40% believe this would allow them to save money by sourcing better deals more regularly.
A third of those surveyed said length of their mobile contract is a key consideration when picking a deal.
David Taylor, chief operating officer of Tesco Telecoms and Tesco Mobile, said:
“There needs to be more choice in the market when it comes to mobile contracts. Eighteen- and 24-month contracts are great for some people, especially when it comes to high spec smart phones, but financial uncertainty and rapidly advancing technology means that there are a lot of people who don’t want to be tied to their mobile.
“Tesco Mobile prides itself on customer service and by responding to consumer needs and we hope this move will shake up the market and give choice back to the consumer by winning back the space for 12-month contracts.”
According to Tesco Mobile, 48% of those with an 18- or 24-month contracts are spending between £40 and £100 on the latest handset because they cannot wait until the contract renewal date.
Eighty per cent of people believe the 12-month contract is their ideal contract, stating this type of contract offers more regular handset upgrades.
A third said this type of contract also offers peace of mind by not being tied into a contract they may regret later.
For more information on Tesco Mobile’s 12-month contracts visit www.tescomobile.com