VMO2 warns of rivals’ price rise ‘double whammy’
April 3, 2024
Research from UK multiplay telco Virgin Media O2 claims that millions of consumers who have mobile phone contracts with rival telcos EE and Three are set to receive a price rise so-called ‘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 week commencing April 8th, 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 £50 million (€58.3m) towards their devices across 2023 and 2024 as a result of 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 face an additional £70 outlay for their devices as a result of these rises.
Worryingly, says VMO2, 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, contends VMO2.
Virgin Media O2 has been campaigning to stop the ‘Smartphone Swindle’ since May 2023 and estimates handset overpayments are costing consumers across the country over half a billion (£530 million) every year, with the average impacted consumer worse off by more than £200.
VMO2 says it 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 says it has protected direct customers from making additional payments towards their phone, a simple mechanism that the overwhelming majority (80 per cent) 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 per cent) of Brits were unaware this was the case.
“In 2013, we led the mobile industry by launching O2 Refresh, the market’s first split contract,” stated Rob Orr, Chief Operating Officer, Virgin Media O2. “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 £500 million paying for phones they already own. This impending price rise double, or even triple, whammy is set to only worsen the problem.”