"Get a Free Phone—Just Pay ¥199 Monthly for 3 Years!"

Telecom carriers have been using this tactic for years. You might have been warned not to fall for it, but in reality, this is essentially a hidden microloan service set up by the carrier. As a rigorous financial account, let’s break down how telecom companies and financial institutions operate behind the scenes.

Whether it’s a free phone, smart speaker, or smartwatch, there’s usually an installment contract involved—where you take out a loan through the carrier and repay it to a financial institution.

Your monthly phone bill acts as a loan repayment, meaning the cost of the device is deducted from your plan fees. Since it’s tied to your contract, you can’t cancel it before the term ends unless you pay a penalty. If you stop paying, it could hurt your credit score, making future loans (like for a house or car) much harder to secure. Yet, the deal is marketed as "Get a free phone—just pay your monthly bill!"

Sales staff won’t explicitly call it an "installment loan." If they did, many customers would hesitate or refuse, which hurts their sales targets.

China Telecom’s subsidiary, WingPay, fully owns Sweet Orange Financial Leasing (Shanghai) Co., Ltd., which offers "Orange Installment"—a credit-based phone purchase program. Most "free phone with plan" promotions in telecom stores operate this way. Here’s how it works:

• You pay your monthly bill.

• The carrier diverts part of your payment to WingPay, which then repays the loan company.

Officially, sales reps should have customers hold the "Installment Agreement Notice" and take a photo with the product as proof of consent. The notice typically highlights key terms in bold, like:
✔ "Installment product"
✔ "Late payments affect credit"
✔ "Penalties and interest apply"
However, many elderly users or financially inexperienced young people sign without fully understanding. Some sales reps even take photos of customers without their knowledge or forge signatures on contracts.