The two-year contract has been one of the cellco’s most powerful weapons in the high value postpaid market, enabling an operator to lure users with hefty subsidies on expensive smartphones, and still ensure a profit on that customer over the period of a 24-month lock-in. However, the day of the two-year deal is coming to an end, at least in Europe, because of new regulations and rising competition. This was highlighted when Vodafone became the first major cellco in the ultra-competitive UK to introduce smartphone deals of just 12 months.

The operator is responding to the huge pressure from its rivals, especially in the UK, where it trails behind both the T-Mobile/Orange joint venture, Everything Everywhere, and O2. It also sees competition from MVNOs at the low end – retail giant Tesco’s mobile offering has already introduced 12-month deals, and has been marketing these aggressively against the main carriers.

Vodafone will kick off a new retail marketing campaign of its own this month, with one-year contracts starting at £35 a month and associated with four high end handsets – the HTC Desire HD, RIM BlackBerry Torch, Samsung/Google Nexus S, and the Nokia N8. Other models will also be included in the scheme as it evolves. It has actually already added the new deals to its range, but has not yet advertised them, although it has had 12-month terms for SIM-only contracts for some time.

Other cellcos will soon have to follow Vodafone’s lead in Europe, as EU regulations are impending which will force carriers to offer 12-month options. These could come into force as early as May. Some member states may go even further – the German economics minister, Rainer Bruederle, recently proposed a law that would bar two-year deals altogether

bron:Rethink Wireless