It's subsidised in that they are fronting you the money. My wife has about £100/month disposable income and pays about £30/month for her handset and contract.

It's subsidised in that they are fronting you the money. My wife has about £100/month disposable income and pays about £30/month for her handset and contract. When her renewal comes around she can buy the handset for, say £400. Apart from to get that £400 she needs to go without beer and eating out and new shoes for 4 months (never going to happen). Or make do with less for, say, a year (very unlikely given she doesn't really care enough about handsets). Her alternatives are to take the contract and handset bundle or to buy the handset on credit. Assuming she takes a SIM-only plan like mine (£13/month with limits I've never exceeded) that leaves her with £17/month to pay off the credit on £400. I've not done the figures but I'd say that probably works out at around two years - so it doesn't really give her any advantage beyond avoiding lock-in; which she'll only care about if we change country (remember she's not really bothered about handsets) Which is all a long way of saying that many people's priorities aren't the same as ours (by which I mean frequenters of Hacker News) - which alters the equation and makes buying off-contract less appealing than getting everything up-front and paying for it over time. Edit: typos