Getting a free phone sounds good, but it may not be the best long-term financial decision. How much are you really paying for the phone? What happens if you lose, or accidently damage your phone? Can you modify the plan, after you sign the contract? Are you ready to be bound to a carrier for 18 to 24 months? Signing a contract is a major decision. In Costa Rica, once you sign a contract, you are committed to the contracts terms and conditions. Contracts are written in Spanish, which makes even more precarious for anyone one who cannot read Spanish contracts.
SUTEL recommends that anyone purchasing a cellphone on a contract ask the following questions before signing a contract.:
| 1. |
Carefully read the contract to know the commitments agreed to by signing it. |
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Reading the contract at the time of purchase does not allow you the necessary time to fully understand the terms and conditions. The best practice is to read the contract prior to making a final decision to select a carrier. For the convenience of English speakers, I have provided English translations for the Kolbi and Movistar contracts. These translations were made using Google Translate, with no attempt to correct the resulting translation. Consequently, they may be a little difficult to read. The contracts are provided strictly as an aid to English speakers, and have no legal validity. The Spanish contract is the only legal contract. The Kolbi contract comes in two parts. The Universal Contract (English translation) covers all ICE communication services. The Postpago Mobile Contract (English translation) is an annex to the Universal Contract that applies strictly to mobile devices. You also need to read the requirements for a postpago contract, including salary requirements. Movistar has a single contract (English translation), with an annex that is an identification and services addendum completed at the time of purchase. The Movistar FAQ provides no information about income requirements required to qualify for the plan that you wish to purchase. To prove your ability to pay, you must submit an certified statement from your bank for the last three months. Movistar then performs a credit analysis, which takes 48 hours. According to Section 10 of the contract, Movistar may require an initial security deposit after performing the credit analysis. Claro does not provide an on-line version of their contract. You must obtain a contract from an authorized service representative. The Claro FAQ provides limited information regarding prepago services. |
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| 2. | Ask about possible penalties, in the event that you want to break the contract. | |||||||||||||||||||||||||||||
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When you purchase a phone through a prepago contract, you are purchasing an 18 or 24 month commitment to pay the contract amount. If your phone is lost or stolen, you still are bound to the contract. If you do not lke the service provided by the carrier, you are still bound ot the contract. Every contract has a termination fee, and it can be very expensive. It is important to note that both Kolbi and Movistar charge a fixed fee for early termination of a contract. The fixed fee for the terminal is the spot price of the terminal at the time of purchase minus any amount paid at the time of purchase. The contracts do not clearly specify that a portion of the monthly fee reduces the contractual obligation. You must verify this condition prior to signing the contract. Kolbi has a flat termination fee for the life of the commitment, which depends on the phone purchased. In case of lost or theft, you can replace the phone at the spot price. Any replacement phone must be a SUTEL certified phone. After you have completed the minimum commitment, the standard termination rules specified in the contract apply. Section 41 of the Movistar contract covers general conditions for termination, while section 42 covers termination by the client. According to section 42, you are responsible to repay Movistar for the difference between the cash price at the time of purchase minus any initial payment for the phone. It is a fixed fee through out the minimum period of the contract. Section 16 of the Movistar contract states that theft or loss of a terminal (your phone) and/or SIM constitutes grounds for termination of minimum time contracts, or those in which a terminal is provided by Movistar. Item 14 of the Claro FAQ states that the termination fee is amortized across the life of the contract period. You need to verify the amortization rate prior to signing the contract. Item 15 states that you are responsible for the loss or theft of your phone. Claro provides no insurance. |
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| 3. | Compare the packages offered by various operators. | |||||||||||||||||||||||||||||
| There are two parts to comparing package prices: 1) Compare the costs of the phone, as they determine the termination cost. 2) Compare package prices gratis along with different down payments. Kolbi prices the phone separate from the 3G data plans. Claro and Movistar may bundle the two for certain phones. While Kolbi and Movistar provide pricing information on their Web sites, Claro does not. For Claro, you will have to visit their store to get the latest pricing brochures. | ||||||||||||||||||||||||||||||
| 4. | Check your normal consumption per month and compare it with the packages and offers. | |||||||||||||||||||||||||||||
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If you are looking for a gratis cellphone, the package may be for far more minutes than you plan to use. For example, a gratis Samsung Galaxy S III requires the 1000 minute plan from Kolbi plus either the 512 Kbps or 1 Mbps data plan. Claro offers a package plan for the Samsung Galaxy S III for 950 minutes and the 4 Mbps data plan. For Movistar, you need to contract the 1500 minute plan that includes data at 4 Mbps. When considering the cost, you need to figure your actual usage against the plan. Since minutes do not role over to the next month, you may be paying for time that you do not use. If you select a plan that matches your actual usage, then you need to make a partial payment on the phone. The strategy is simple, the unused minutes pay for the phone. To find out what you are actually paying for the phone calculate the difference between a plan without a terminal and one with the terminal. The difference is what you are directly paying for the phone. To this amount, add the difference between a no terminal plan that matches actual usage versus the no-terminal variant of the required plan. Following is a comparison for the Samsung Galaxy S III for the gratis option based on an actual usage of 500 minutes. The table uses a the spot price of 16,937 colones per month over 24 months, which is the based on the prepago kit price from Kolbi.
* Kolbi and Claro do not have postpago plans that do not include a terminal. For the purpose of comparison, the prepago cost per min charge was used. ** The data rate for the Movistar 500 minute plan drops to 1.5 Mbps. The 4 Mbps is only available with the 1000 minutes per month plan. For a more accurate comparison, you would need to include SMS and MMS messages in the calculations. However, the SMS/MMS limits are low enough that it is not going to make a large difference in the cost per month. |
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| 5. | Review the characteristics of the mobile device to see if it meets your expectations. | |||||||||||||||||||||||||||||
| The mobile network operators provide a minimal description of the the phones. For more complete details, you need to consult a site such as GSM Arena. There are often different models for the same phone, so you need to look at the characteristics for the exact model that is being offered. The phone models imported to Costa Rica are normally the International model. You should also read several reviews about the product, and compare it to similar models. | ||||||||||||||||||||||||||||||
| 6. | Does the plan allow you to add additional options, or to upgrade options (for example: internet speed). | |||||||||||||||||||||||||||||
| Plans generally allow you to add options to the initial agreement. However, adding to options may require a new verification of ability to pay, and may require making a deposit. The International Roaming option is an example of an expensive option that may require a deposit. When making a deposit, you need to check if interest is going to be paid on the deposit. For instance, the Movistar contract specifies the deposits on which they pay interest. | ||||||||||||||||||||||||||||||
| 7. | Ask about options to change the plan, if you need new conditions. | |||||||||||||||||||||||||||||
| You can generally remove options that go beyond the minimum agreement. When the contract involves a terminal, you must always pay the contracted amount, even if you suspend service. The contracts do allow you to change how you pay for the service. The Movistar contract has one major point (see Section 35 of their contract) regarding changing of automatic payments methods. If you establish an automatic payment using a credit or debit card, then you must continue to use this form of payment for a minimum of 12 months. | ||||||||||||||||||||||||||||||
| 8. | Assess the coverage for the places that you plan on using the phone. | |||||||||||||||||||||||||||||
| Claro, Movistar, and Kolbi all have coverage maps on their Web site. If you are going to be using a 3G device, you need to check the 3G coverage area. I found it interesting that the 3G coverage is normally greater than the 2G coverage. Kolbi offers the greatest coverage area, while Claro and Movistar continue to expand their coverage areas. If you have a cellphone, you might consider purchasing a prepago SIM chip to verify the coverage in your area, before signing a contract. | ||||||||||||||||||||||||||||||
| 9. | Review the contract clause that allows the operator to share your data to third-parties: offers of credit cards or messages offering sales. | |||||||||||||||||||||||||||||
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When you sign the initial contract with Kolbi and Movistar, you having the option of saying that you do not want the operator to share your information with third-parties. If you chose the yes option when you signed the contract, you can always contact customer service and have the option changed to no. You need to verify Claro’s position regarding promotional calls and messages. The real danger lies in third-party services that charge a fee to your phone account. You are responsible for these fees, and for canceling the service with the third-party. |
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| 10. | Ask about the warranty conditions for the device that you are buying. | |||||||||||||||||||||||||||||
| SUTEL does require that all devices sold by a carrier be new and not reconditioned. Beyond the manufacturers warranty, you need to verify with the mobile network operator any additional warranties. The contracts clearly state that you are purchasing the device, and that any loss or damage is your responsibility. Kolbi does offer a one-year insurance contract for selected models that covers accidental damage and theft, but not losing the phone. For all other operators, you should consider purchasing electronic equipment insurance to protect against violent theft, fires, and natural disasters. | ||||||||||||||||||||||||||||||
It takes time to review a contract. Contracts are not exciting reading. However, the time spent reviewing the contract is time well spent, when you consider that you are going to live with the contract for 18 to 24 months. It goes without saying that you need to keep a copy of the signed contract in a safe place. In the final analysis, you may decide that purchasing a phone with a prepago plan is the best option. While you may not get the highest Internet speed or the lowest call rate, you do have the option of changing mobile network operators.
