Lidl has just moved into the mobile phone market. Can it save you money?

Earlier this month Lidl created quite a stir when it announced it had started selling something unexpected – and not just the jack hammers, blow torches and inflatable swimming pools that we have grown accustomed to finding in the middle aisles.

The new unexpected things that Lidl started selling was mobile phones – or at least access to the Irish mobile phone network.

The top line was quite alluring.

The first 100,000 people who signed up to Lidl Connect were promised a monthly charge of €8.99 for life. They were given the option of picking up a physical Sim card in any Lidl store for an additional €0.99 or selecting an eSim and completing their registration via the Lidl Plus app at no extra cost.

The monthly rolling plans require no long-term commitment and include unlimited 5G data, unlimited calls and texts to any Irish and UK network, 50GB of EU and UK roaming data and 100 international minutes per month to more than 38 countries.

People who decided to migrate to Lidl Connect were told they could keep their existing mobile numbers or choose new ones if they were so inclined.

But bells and whistles and portability aside, it was the price tag that got Lidl the most attention, although we should point out that its offering is not all that much cheaper than Tesco’s Sim-only deal, which costs a tenner a month.

Lidl Connect is, however, much cheaper than what many Irish mobile phone users who are on long-term contracts are accustomed to paying.

How much cheaper?

That is the interesting thing.

A typical bill-pay customer might be paying €50 a month – a price that might include a free handset every couple of years. Or might not.

Leaving aside the handset for a moment, a 20-year-old who chooses the €8.99 a month deal at Lidl and lives for the next 70 years and never leaves the German discounter will end up paying a total of €7,551.60 over the course of their – hopefully – long and happy life.

Were this notional 20-year-old to instead sign up to a monthly bill-pay deal with one of the State’s leading operators and live for the same 70 years without ever switching, the total cost of their mobile phone would come in at €42,000 in today’s money.

Now we know we are making a lot of assumptions here, not least that we will still be using money, mobile phones or indeed Lidl 70 years from now.

But you get the idea. Sim-only, pay-as-you-go deals are much cheaper than the alternative.

But despite the savings to be made, a great many people ignore them. Sometimes they don’t even know the savings are on the table.

The way the system works sometimes actively works against us. Mobile phone contracts often include a new phone as part of the initial deal and last for two years. A significant chunk of the monthly tariff over those two years is used to pay for the “free” handset that was given at the outset.

But under the terms and conditions of almost all bill-pay contracts, once the two years are up, you own the handset outright, so obviously the monthly cost should fall.

Only it doesn’t.

After the first two years, a mobile provider can offer you a new phone in return for a new contract.

But if you’re happy with your current handset or don’t get the offer or contact your provider to arrange a better deal – or switch to a different, cheaper provider – the company will keep charging the original monthly fee.

Actually, they might even charge more because, over the two years, as a bill pay customer you will most likely have been hit with two automatically-imposed price hikes. Virgin Mobile is an exception to this rule.

So, if you sign up to a two-year contract with a monthly payment of €50 and continue to pay in full after the contract ends, you’re giving the company at least €40 a month for absolutely nothing. That is €480 a year.

According to admittedly self-interested research published by Sky Mobile to coincide with its arrival in the Irish mobile market a couple of years ago, about 300,000 people in Ireland are overpaying each year.

If they all overpay by €40 a month, then Ireland is collectively wasting close to €150 million every single year.

Under ComReg rules, the mobile phone providers “must make you aware that your contract is coming to an end and that you may cancel your current plan”.

“Your provider should also send you ‘best tariff advice’ highlighting the best tariff, price plan or bundle, from your current service provider that suits your needs.”

No doubt that is done but if it is to make any difference you have to actually read the correspondence you are sent and we all know that is a big ask.

In a moderately ideal world, the price of your phone contract would automatically drop after two years to reflect what you are actually paying for, rather than what you were paying for at the start.

But our world is a long way from ideal, which is why you need to look after yourself.

If you own a phone outright, the cheapest thing to do is to hang on to it and request your current provider to unlock the device, allowing you to switch to a Sim-only plan with another provider, or with the likes of Lidl.

The switching process is not overly complicated, although it is not always free of complications, and you obviously get to hang on to your existing number.

As well as Lidl and Tesco Mobile there are also the likes of Sky Mobile, Clear Mobile and GoMo, all of which piggyback on the main providers’ networks, so the level of coverage should be comparable.

That is not the only way to save.

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A lot of higher-priced contracts are sold with the promise of huge amounts of data. But most users rarely exceed the standard amounts on the table, particularly if they are good at connecting to free wifi when out and about.

Another easy money saving measure is a good haggle. Before your contract is due to end, work out what the alternatives are and then demand better value. If you are getting nowhere with the person you are speaking to, ask to talk to someone in their retention unit; they might be more receptive to your threats to leave.

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No matter who you are with or how much you are paying, do pay attention to roaming charges. Thankfully – because of our friends in Brussels – roaming charges are not the same money-grabbing gouging curse they once were (at least when you are using your phone across the EU) but if you are outside of the EU – or taking a ferry from Ireland to France, for instance – you could still be hit with a savagely high bill if you roam like you’re at home.

And do consider insurance. It can cost more than €10 a month but if you are prone to breaking or losing your phone, it can be money well spent. Before you sign up, check whether the contents insurance you have for your home covers personal possessions, as that might give you a safety net of sorts. If you do have specific mobile phone insurance and do change your handset, don’t assume the old policy will cover the new phone. It might not and that could see you paying for insurance on a phone you no longer have.

And if you are going Sim-only, consider buying second-hand. There are a lot of platforms offering refurbished handsets for a whole lot less than they cost new and even Apple sells refurbed phones. Just make sure you check the terms and conditions and have a degree of protection should things go wrong.

You can contact us at OnTheMoney@irishtimes.com with personal finance questions you would like to see us address. If you missed last week’s newsletter, you can read it here.