Reliance has made quite the splash after announcing the iPhone 5s and 5c will be available at an offer that’s quite similar to the carrier subsidy model that’s prevalent. So how does this deal work and is this for you? Let’s not waste any time in finding out.
How does this deal work?
- You pay 3k a month for the 5s, 2.6k a month for the 5c. This goes on for two years. No down payments or security deposits. After two years, you’ll pay a rent of 1.5k a month.
- This offer works only with certain credit cards (ICICI, HDFC, Citibank and Standard Chartered). If you don’t have these, you’ll need to pay the entire 24 month amount up front.
- The entire amount of the transaction is blocked from your credit limit. You only pay the EMI to your card issuer.
- You get unlimited calling (including STD) messages (including STD but upto TRAI’s limits, which are at 3000 messages a month) and data.
- Benefits are applicable on roaming.
- You can’t use this for commercial purposes or in a data dongle.
- If you make the entire payment up front, you get a 6k discount.
- You only pay more than the 3k you owe if you rack up international calls or messages (international calling/messaging is enabled by default, no deposits necessary).
- These plans are available for new, old and ported (via MNP) customers.
- You aren’t tied into the phone. You can use the phone with a different carrier. You can use this plan on another phone.
Is this for you?
If you definitely don’t want to use an iPhone (or specifically, either of these two iPhones), then this offer isn’t for you and you should stop reading right now.
If you have a beef against Reliance’s network, you shouldn’t read the rest of this post either.
Now that we’ve got that out of the way, lets understand this offer. The correct way to do this is to first check if we are able to recreate the benefits of this offer as if it did not exist and see how much that would cost us.
The 5s has a retail price of Rs. 53,500. If you took, say, a personal loan to buy this and paid the loan back as an EMI for 24 months, you’d be paying Rs. 2,594 a month for a 15% interest rate personal loan (which is a competitive rate today). If you were lucky and got yourself a 10% interest rate (say on an overdraft against your own funds, or borrowed some cash from your parents), you’d be paying Rs. 2,469 a month.
Now cellular plans can vary significantly by operator and usage patterns. A reasonably useful plan will cost you at least 500 bucks. If you use your phone A LOT, with voice and data, a realistic plan is closer to 1,500 a month. You could be paying much more if you travel a lot (and thereby use your phone on roaming a lot).
So, to get similar benefits, you’ll be paying anywhere between 3k and 4.5k a month (this includes amortizing the cost of the phone over 2 years).
Reliance offers you this deal at Rs. 2,999 WITH a pretty great cellular plan. So, should you take up this offer?
> Yes, if you use your phone a lot. If you have a monthly bill of 3k or more, you’re basically getting an iPhone free here. If you have a bill of 1.5k, you’re getting a phone worth 53.5k at 33k (amortized at 10%).
> Yes, if you want either of these phones and have a bill of over 500 bucks.
Talk to a few people and try to understand if Reliance’s GSM network and 3G works well in the areas you’re going to spend most of your time (home, office). It has to be unpleasant to be paying 3k a month when you don’t have any Reliance towers within range.
Behind the scenes
I’m always a bit skeptical of delving into how these things work behind the scenes, because, as a common consumer, I won’t have access to the rates and economies of scale that these companies are going to have. Nonetheless, here is how it works:
Reliance values the entire deal at Rs. 61,856 and gets your card issuer to give you a loan of that amount at an interest rate of 15% for 24 months.
If you have access to cash at a better interest rate (don’t ever forget the time value of money), such as at 10%, you could pay your card issuer the entire loan amount (this is a matter between you and your card company, Reliance doesn’t care) at the beginning and structure an EMI schedule of your convenience. For the sake of comparison, if you chose a 24 month schedule, you’d have an EMI of Rs. 2,854 (saving 3.5k over 2 years). If you had access to interest-free cash, you’d save about 10k.
You could sell the phone unboxed as soon as you bought it. Assuming you got 48k for the device (I imagine the market for standalone 5s/5c instruments is going to become cheaper because of this offer) and paid that to your card company you still need to pay your card issuer about 14k. This leaves you with a plan of 680 bucks a month. If you manage to sell it at MRP (53,500), you would need to pay only 400 bucks. Not. Too. Bad.
Heck, you could sell the iPhone and buy an inexpensive, yet capable phone and you’d still come up on top. PriceBaba can help you here.
The Baba approves this offer for you if you use your phone a lot and you want the iPhone 5s/5c. But remember to check the network coverage in your area.
Guest Post by Aditya Sengupta, talk to him @sengupta