Smart phone subsidies hit telco bottom lines today. But what if Facebook decides to become a service provider in its own right? What chance do retail phone companies have then?

LG, Blackberry and HTC all have new smartphones out, ahead of the launch of the new Samsung Galaxy S4. The mobile carriers, it seems, are falling over themselves to tie up deals and offer the best price to customers.

Often the devices come with hefty subsidies from the service provider. Take Vodafone’s offer of a free iPhone4 on a $30 plan, for example. Can they really make money on such a high cost of acquisition on a low ARPU customer?

So, are the phone companies getting pushed around by the device manufacturers? It’s clear they are. People are more interested in the latest gadgets than the humdrum facets of the network they use, so telcos are having to cut costs to compete.

The situation could get worse. What happens when Facebook starts to offer voice calls globally? Worse still, what if it becomes a service provider in its own right? They could subsidise the cost of access with the extra opportunities from advertising.

In such an environment do mobile carriers really have a future in the retail space, or could they be forced to become wholesalers only, servicing the big international brands who control the relationship with the customer?

This week Phil Dobbie talks to:
– Mark Spoonauer, editor in chief for Laptop Magazine
– Foad Fadaghi, senior analyst at Telsyte
– Paul Budde, managing director of Paul Budde Communication
– John Strand, CEO of Strand Consult