Mobile phone subsidies, which are seen as a “necessary evil” for the development of mobile phone services, have helped kick start the mass market for mobile phone services in many markets around the world. Handset subsidies are viewed as a loss leader strategy, a means for bringing new subscribers onboard, or encouraging existing subscribers to churn away from their existing network and onto a competitor’s. More recently there have been some initiatives to lessen the dependency on handset subsidies, but can operators really “kick the habit”? In the electronic products and services world, the mobile telecoms sector is unique in its adoption of handset subsidies. When customers purchase a digital camera or laptop at an IT store, they don’t get a subsidized device from Microsoft (for example) even though they will then buy an operating system (MS Windows), a productivity package (MS Office), take advantage of Microsoft’s multimedia and entertainment applications (Internet Explorer, Media Player, and so forth), and then upgrade one or more of those items over the following two or three years .
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