Mobile phone prices set to rise in Australia

SYDNEY--The cost of buying a mobile phone in Australia is about to soar as telcos prepare to remove subsidies that have kept the prices of handsets down.

Telstra will remove all subsidies from early next year and Optus will phase them out over the next several months.

Other telcos are expected to do the same in a move that will also see the end of long term plans that bind users to the one telco for up to three years.

The removal of the subsidies will mean that mobile handsets will cost up to A$1800 (US$930) with the average price being between A$300 (US$155) and A$600 (US$310.) However, telcos are so far declining to say how the changes will effect the total cost of ownership of a mobile phone.

While none of the major mobile service providers have released details of their new pricing plans, both Telstra and Optus are looking at the feasibility of offering finance to customers wanting to pay off their new phones.

Telstra corporate affairs manager Tim Scott said the corporation had already begun reducing or removing subsidies on several of its phone plans.

"Subsidies on pre-paid plans were removed in January and there have been no subsidies on GPRS handsets since we launched the service in March.

"All subsidies will be removed by early next year and you will see some fundamental changes to our pricing plans. There will be a complete new model for how mobile phones are offered to the market," Scott said.

A spokesperson for Optus said there was a global move away from handset subsidies and Optus was following that trend.

"While we have not set a date for completely removing subsidies we do believe that is the way the market is heading.

"Handset subsidies were a great way to entice new-to-market customers, but times have changed. More than 60 percent of Australia's population now has a mobile phone and they are holding on to them longer.

"We are seeing phones being handed down through families and businesses. For example a boss may get a new phone and pass his old one on to someone down the corporate ladder," she said.

Customers would be given greater flexibility to tailor their pricing plans to suit their usage and new BYO (bring your own phone) plans would be available, she said.