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Basically... When you get a new phone, you're 'tied' to a contract for a minimum length of time (12,18 or 24 months). The phone companies do this - so that they get the cost of the handset back in a short period of time. If you leave a fixed-term contract before its end date - you'll usually pay a 'penalty' (normally the value of the 'unused' months) as an exit fee.

Once the fixed-term expires, you're usually transferred to a 'rolling' contract. This means that the plan simply renews every month unless you cancel it. The rolling contract is usually much cheaper than the initial fixed-term one - because you're on a 'SIM only' plan. You're just paying for the service - not the handset.

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