Optus to pay mobile phone contract exit fee of rivals

PUNISHING mobile phone contract exit fees are set to end as a major telco effectively promises to pay the cost of breaking an agreement.

PUNISHING mobile phone contract exit fees are set to be shown the door.

In what is being hailed as a win for consumers, one of the big three telecommunications companies is effectively promising to pay the cost of breaking an agreement — and its rivals are tipped to follow suit.

News Corp Australia has learnt Optus will this week begin offering $200 toward an early termination fee plus about $250 credit for trading in an old smartphone.

Telcos routinely do one or the other, but Optus says this is the first time the sweeteners have been brought together.

In its sights are consumers who would upgrade to the iPhone 6 as soon as it hits the market — likely to be a matter of weeks away — were they not still stuck with iPhone 5 contracts.

APPLE iPHONE 6: Ten things you need to know

PAYMENT SYSTEM: Apple in iPhone 6 deal with credit cards

Is this the iPhone 6 ... Photos from Russian Youtuber Rozetked of what appears to be Apple’s next smartphone.

The original iPhone 5 went on sale in Australia late in September 2012. An estimated 1.5 million handsets were sold. Optus believes its two-pronged offer would cover the break charges faced by a Telstra iPhone 5 customer near the end of a $60/month two-year agreement.

As the sector second fiddle, Optus is desperate to lure back customers lost to Telstra.

In the past year the No. 1 player added nearly one million mobile subscribers, bringing its customer base (including non-smartphone users) to 16 million.

Optus lost 126,000 and has about nine million users. Vodafone has five million. For every three people in Australia there are four mobiles. It’s now a $25 billion a year sector.

About 1.2 million customers are due to come off contract before Christmas. Optus wants to get to them before they do.

“There’s a big group that feel they are constrained and stuck,” said the head of Optus’ customer business Vicky Brady.

“We have targeted this knowing there’s an issue.”

Optus may catch its competition napping.

Sources at Telstra and Vodafone indicated they weren’t planning anything similar.

But it won’t be long before they respond, which is why the days of the exit fee appear numbered.

Telstra and Vodafone would likely “neutralise” the Optus offer, said Foad Fadaghi, principal analyst at telecommunications research firm Telsyte.

“This is a win for consumers if we see increased competition around the launch of the new (Apple) handset (and) some of the barriers come down for switching,” Mr Fadaghi said.

More than a fifth of the nearly 160,000 people who complained to the Telecommunications Industry Ombudsman in 2012-13 were cross about their contract.