Prepaid mobile telephony has become particularly popular over the last few years due to a number of practical incentives: It is generally thought to be a more affordable service than contract mobile phones, as prepaid packages do not charge a rental fee, which the subscriber has to pay every month (they do, however, tend to charge a one-off connection fee for the service). In addition, prepaid subscribers do not need to have a contract and are charged on a pay-as-you-go basis except in some countries, such as Switzerland, Thailand, and Malaysia, where a law was brought, which stipulates that prepaid subscribers need to be registered, in an attempt to boost national security (source: BBC).

On the other hand, postpaid subscribers are differentiated from prepaid ones in the fact that they are 'locked' into a contract of a given duration. This varies from country to country and from operator to operator. For example, in the UK the minimum contract period has been 12 months for some time now. At the end of a contract, a subscriber would typically research what is on offer by the operator and would either opt for a handset upgrade or seek to benefit from a lower rental or additional inclusive allowance (this would also constitute renewal of the contract for a further 12 months). Acquiring a new subscriber costs the operator more than retaining him/her. With fierce price competition in all European markets and the subscriber base reaching saturation, operators need to ensure that they keep customers for longer.

Therefore, operators are gradually giving incentives to customers that encourage them to commit to longer-term contracts. The table below illustrates some of the most prominent examples from selected operators from the UK, France, and Ireland:

Table 1: Offers accompanying extended mobile phone contracts from selected operators in UK, France, and Ireland.

UK	Orange	Orange offers a reduced rental of 10 per cent for those that commit to a 24-month contract (offers up to 25 per cent discount on the line rental - starting with 10 per cent in the first year).
	Vodafone	Vodafone encourages subscribers to move to 18-month contracts instead of 12-month by offering the 'Stop the Clock' (for calls lasting less than one hour, only the first three minutes will be charged) - offered for 18-month contracts only.
	O2	O2 offers 50 per cent extra monthly allowance for life with an 18-month contract. For example, O2 200 price plan offers an extra 100 minutes and 100 SMS free every month (offer applying to certain price plans only).
	Virgin Mobile	Virgin Mobile offers a lower monthly rental charge when committing to an 18-month contract. For example Plan 400 inclusive on a 12-month contract is GBP 4.00 more expensive than if taken on an 18-month contract.
France	SFR	SFR offers a minimum contract period of 12 months, but new subscribers can save an additional 10 per cent on their monthly rental, if they subscribe for 24 months (Avantage Fidelité Option). SFR Intégral Absolu and SFR Interne Absolu subscribers can receive a further 15 per cent discount, if they opt for a 36-month contract.
	Bouygues Telecom	Bouygues Telecom offers a lower monthly rental, if subscribers commit to a 24-month contract. For example Forfait Reference 60 minutes inclusive offers the monthly rental at Euro 21.74, as opposed to Euro 24.25 per month, which is the price for subscribers that commit to a 12-month contract only (or a 10 per cent saving on the rental - this type of saving is offered across the majority of Bouygues Telecom plans).
Ireland	O2	Existing customers receive 25 per cent extra minutes every month when purchasing a new 18-month contract.

Note: On the contrary German operators have been offering contracts of 24-month duration only for some time.

The attractive offers that correspond to a longer customer commitment have been designed to increase loyalty amongst subscribers, whilst at the same time rewarding them for renewing their contracts for longer periods. Going forward, in Europe we are generally seeing a move to longer-term contracts and greater rewards for customers. The only drawback from the subscriber's point of view is the fact that they would not be eligible for a handset upgrade, before their contract has expired. With handsets becoming more elaborate and technologically advanced many subscribers choose operator and price plan on the basis of the actual phones on offer. It is thus important for certain subscribers to renew their mobile handset regularly, in order to keep up with the latest technological developments. In such a scenario, it remains to be seen if customers are willing to commit to longer-term contracts at the expense of keeping existing handsets for longer.

TARIFICA is the world's leading specialists in telecommunications pricing and analysis, is a division of Access Intelligence LLC, an international niche services consultancy in the telecommunications industry, with offices in London, New York and Washington DC.

The company, which was established in 1976 as the first consultancy to track telecommunications tariffs, offers a unique repertoire of tariff related products covering fixed and mobile services in Europe, the Middle East, Africa, Indian subcontinent, Asia-Pacific and Latin America. Our multilingual specialist team, which collects data, is constantly updating more than 1 million tariffs from over 200 operators in 120 countries by primary research among the operators themselves.