Warning of a price rise ‘double whammy’ for millions of consumers on bundled mobile contracts

  • Millions of customers on bundled contracts with EE and Three are set to pay an extra £50m towards the cost of their devices as annual hikes hit bills
  • Customers who are out of contract at risk of a price triple whammy as annual hikes set to hit device repayments, airtime tariffs and phones that have already been paid for
  • Virgin Media O2 is urging customers to split, switch, save and share to avoid overpaying for their smartphones

New research from Virgin Media O2 reveals that millions of consumers who have mobile phone contracts with EE and Three are set to receive a price rise ‘double whammy’ on bills this year in a move costing Brits tens-of-millions of pounds.

Both operators have millions of customers on classic bundled deals that combine the cost of a handset with the cost of a data plan. With customers’ entire monthly bills subject to annual inflationary price hikes, which are due to take effect next week, millions are about to receive a double hit as prices go up for both their phones and their data, minutes and texts.

Operators typically buy handsets for a fixed cost from manufacturers. The cost is then passed onto consumers who pay off the cost of the devices through their monthly bills. However, with millions of people on bundled contracts set to receive price increases on devices too, many will find themselves being charged more than the recommended retail price for their phone over the life of their contract.

The analysis reveals customers on bundled contracts with EE and Three are set to pay an extra £50m towards their devices across 2023 and 2024 due to this price rise double-whammy. The average impacted EE customer will be asked to pay out over £80 more for their phone over this period, while impacted Three customers will fork out an additional £70 for their devices due to these rises.

Worryingly, bundled contracts put consumers at risk of a price rise triple-whammy. When these contracts end, consumers receive little to no discount and continue to be charged the same amount each month by their provider despite having paid off their devices.  Even after the contracts have finished, bills are still subject to annual price rises meaning not only are these customers paying for handsets they’ve already paid for, they’re at risk of being asked to pay even more every month for phones that are rightly theirs.

Virgin Media O2 has been campaigning to stop the ‘Smartphone Swindle’ since May of last year and estimates handset overpayments are costing consumers across the country over half a billion (£530m) every year, with the average impacted consumer  worse off by more than £200.

O2 was the first major operator to introduce split contracts more than a decade ago with O2 Refresh. These contracts clearly separate the cost of the device from the cost of the airtime (data, minutes and texts) so customers stop paying for their handset at the end of their deal.

By automatically and fully reducing customer bills once the handset has been paid off, Virgin Media O2 has protected direct customers from making additional payments towards their phone, a simple  mechanism that the overwhelming majority (80%) of Brits support.

Split contracts also shield consumers from bill shock as annual price increases only apply to airtime plans – which typically make up less than half of the total phone bill. Polling shows almost two thirds (65%) of Brits were unaware this was the case.

Rob Orr, Chief Operating Officer, Virgin Media O2 said: “In 2013, we led the mobile industry by launching O2 Refresh, the market’s first split contract. Not only does this protect consumers from paying extra for their devices whilst in contract; it also means they’ll never pay for a phone that’s rightfully theirs once the deal comes to an end.

“Since we first called on the industry to ‘Stop the Smartphone Swindle’, consumers have forked out the best part of £500m paying for phones they already own. This impending price rise double, or even triple, whammy is set to only worsen the problem.”

Virgin Media O2 is urging consumers to use its online calculator to check if they’re overpaying for their smartphones and to follow four simple steps to prevent it from happening in the future:

Split – your device and airtime wherever possible

Switch – if you are at risk of overpaying for your handset at the end of your contract and don’t have the option to split your bill, switch to another operator

Save – money by being aware of this issue and never overpaying for your handset

Share – tell friends and family if you think they might be paying for a phone they already own

The post Warning of a price rise ‘double whammy’ for millions of consumers on bundled mobile contracts appeared first on Virgin Media O2.

Source: O2 Blog