Don't Be Seduced By Mobile Freebies

Free gifts with mobile phone contracts may not be as good as they seem.

Fancy a LCD TV for free? Perhaps a Nintendo Lite? Or a shiny new iPod Nano? Maybe a laptop? If you sign up for a new mobile contract any one of these free gifts could be yours.

But will you be paying for it in the long run?

Free gifts

According to mobile comparison website Omio.com, most mobile tariffs costing more than £40 a month come with some kind of freebie. The site found that out of 102,744 deals currently available, 8,756 offered a free Nintendo Lite, 7,529 gave away a Nintendo Wii, 13,892 threw in a laptop, 5,470 included a Playstation 3, 19,695 lured customers in with an iPod, and there were 1,289 TVs up for grabs.

Free gift deals are typically offered by online retailers rather than the networks themselves - some also offer cashback or half price line rental on certain deals. Omio says cashback or half price offers tend to work out better than deals offering freebies.

Half price line rental vs free gifts

Let's compare a couple of deals available on mobiles.co.uk. You can get a LG KC910 Renoir handset on O2 with 600 minutes a month and unlimited texts for £35 a month. The contract is for 18 months but you get 14 months half-price line rental meaning you'd pay a total of £345 over 18 months.

If you wanted a free Nintendo Lite you could get this gift alongside the same phone on the same network and tariff for £30 a month on a two-year contract. This would cost you £720 over two years - or £540 over the first 18 months to make the comparison easier. But you can pick up a Nintento Lite for around £100, so you'd be better off taking the half price offer and buying the games console out of the money you save. This way you'd be £95 better off.

Result: Half price line rental is better than a free gift.

Cashback vs free gifts

Cashback offers have come in for some bad press in the past with retailers either going bust or having such stringent terms and conditions that it's almost impossible to get the cashback you're owed. Personally, I'd be pretty wary of these deals but let's be optimistic and, assuming they'll pay up, look at how they stack up against free gifts.

Website Mobile Express has a cashback deal on a LG KS360 handset on a two-year Orange contract. You get 300 minutes and 100 texts a month for £20. The deal comes with £170 cashback.

Alternatively, the same retailer offers the same phone on the same deal with a free 8GB iPod Nano. iPod Nanos retail at about £107 so if you took the cashback deal you could buy the iPod and have £63 left over.

Result: Cashback is better than a free gift.

Standard tariffs vs free gifts

Sometimes - but not always - even a bog-standard tariff direct from your network will work out better than a deal including a free gift.

Orange's Dolphin 35 tariff is on special offer at the moment. For £24.46 a month you get a choice of handset, 600 minutes and unlimited texts. Over 18 months the deal costs £440.28.

OneStopPhoneShop.co.uk offers an 18-month deal on O2 that includes 600 minutes, 500 texts and a Blackberry Curve handset. The deal costs £35 a month and includes a Jawbone 2 Bluetooth Headset. So over 18 months you'd pay £630. But you can buy a Jawbone headset for about £70 so you'd be better off on the Orange deal (which offers the same amount of minutes and more texts) and buying the headset separately. Doing this would save you about £120.

Result: Standard tariff is better than a free gift.

Haggling

Personally I've found that every time I shop around for a new mobile deal I end up back where I started with my current network. The last time I negotiated a new handset, 600 minutes, unlimited texts and unlimited web browsing for just £20 a month on O2. So over 18 months this will cost me £360 which beats the free gift offers mentioned in this article either on price or the amount of minutes / texts or both.