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Brazilian carriers forced to stop selling subsidised smartphones

July 4, 2012
As you guys may know, it is very profitable for carriers to subsidize the price of smartphones, as long customers agree to sign a contract with said carrier (be it one year or two years in length). The initial discount is recuperated by the carrier before the end of the contract, and then some. But customers rarely complain about this arrangement, given that unlocked smartphones are for most way too expensive to be paid for up front. This is especially true in emerging markets.

In an unexpected turn of events, according to Brazil’s Federal Public Ministry, all mobile carriers operating in Brazil have been recently forbidden to sell discounted smartphones tied to one-year contracts, as state institutions have deemed this practice to be a tie-in sale, apparently an unlawful practice in Brazil. Carriers that will continue with the sale of contract-tied, network-locked smartphones will be forced to pay a daily fine of R$50,000 (US$25,100). A court has issued this decision last Friday, although you’ll find that most tech specialists are willing to bet that all carriers will appeal the ruling.

While it is not my competence to talk about the legal practices in one country or the other (leaving this sort of stuff to the lawyers seems to be the best decision one could ever take), it seems to be probable that Brazilian carriers will stop subsidizing smartphone prices. Such a move might hurt smartphone sales, thus stopping the impressive growth of the Brazilian smartphone market.

What do you guys make of this story? Should all carriers worldwide be forced to stop selling subsidized smartphones tied with contracts, or would such a decision represent the biggest conceivable blow to the smartphone market? Drop a comment in the section below and share a thought!