- Wealth PMS
You might remember last month’s outrageously popular post on the iPhone 5S “bundled” offer by RCOM, where you paid Rs. 3,000 per month, and got data, calls and SMS free. As I’d mentioned, this was just a credit card based financing policy and made sense only if you had a very high call/data usage, didn’t mind switching to the RCOM network, and didn’t care about upgrading the phone for two more years.
It turns out RCOM has increased the price on the deal by 20%. Now, the Rs. 3,000 offer is only available if you pay Rs. 12,500 upfront. If you want to pay nothing upfront, the monthly cost has gone up to Rs. 3,600 instead.
While the dollar depreciation couldn’t have been the primary concern (between November and now, rates have been steady) it must be that the cost of the service is higher than they anticipated. They have effectively increased prices by about 12,500 rupees.
The amounts charged on the card for option 1 and 2 are Rs. 62,000 and Rs. 75,000 respectively. And guess what, I thought I remember that HDFC cards would also participate, but they seem to have dropped out.
The price of the iPhone 5S is about Rs. 52,000 (Flipkart) and if you assume RCOM is getting the phone at Rs. 45,000 now, they’re charging you Rs. 74K, so their service amount is about Rs. 30K upfront for 24 months. How much does that mean to RCOM?
We can calculate this. Assume RCOM can borrow at 12% per annum. When you pay them Rs. 30,000 upfront, that money can be amortized over 24 months at a “discount” rate of 12% per annum (1% per month) The way to find out how much it means to them per month, is to use Excel’s PMT function. Use
=PMT(1%, 24, -30,000, 0) [In 24 months, we start with Rs. 30,000, end with 0, rate of 1% p.m.]
= Rs. 1412 per month.
That’s not a bad deal for RCOM at all, even for unlimited voice and data. Definitely better than earlier.
What about for you? If you can buy the phone at Rs. 52,000, it means Rs. 22,000 extra for 24 months for the RCOM unlimited deal. Using a discount rate of 10%, this is an effective cost of Rs. 1,015 per month to you. You have to weigh this with the RCOM network coverage, the amount of your average phone bill, and how long you can stick with this phone. (Yes, there’s the ability to resell at a reasonable price too)