Mobile customers on Sim-only contracts could be charged up to £120 more than they expected over the course of their contract due to two years of eye-watering price hikes, Which? warns, as it campaigns for an end to unpredictable mid-contract price rises in the telecoms industry.
Which? is sounding the alarm on unpredictable mid-contract price hikes as it campaigns for providers to do the right thing and stop these increases – and for Ofcom to ban the practice altogether.
The Big Four mobile firms – EE, O2, Three, Vodafone – represent 68 per cent of the UK mobile network market and hike prices every April in line with the Consumer Price Index (CPI) or the Retail Price Index (RPI) plus an additional 3.9 percent, with no detailed breakdown of how that additional figure is calculated. If Sim-only customers are in-contract and want to avoid these hikes, they can be charged punitive exit fees of up to almost £300 to leave their contract early.
Some smaller networks, including BT Mobile, iD Mobile, Talkmobile and Tesco Mobile, will also hike their prices in line with CPI plus 3.9 per cent in April 2024.
However, these unpredictable mid-contract price hikes particularly add insult to injury for loyal Big Four mobile customers – who are already paying significantly more for their Sim plan than they would at smaller rival networks.
Based on snapshot analysis of pricing data and Bank of England inflation forecasts, Which? has predicted how much EE, O2, Three, Vodafone Sim-only customers could see their bills increase by in 2024 and over the course of their contract, compared to the amount they were quoted when they originally signed up.
On average, EE, Three and Vodafone customers could see increases of more than 8 per cent in 2024 while O2 customers could see rises of over 10 per cent.
Based on prices on the providers’ websites for a 12-month Sim-only contract with unlimited data, calls and texts, O2 and EE customers could see the biggest annual increases of £24.02 and £20.58 respectively in the year from April 2024. Three customers could see a smaller annual price hike of £15.88 on average.
These hikes would come on top of the eye-watering price hikes of more than 17 per cent many consumers faced in 2023.
Which? also calculated how much extra these two rounds of price hikes could cost a customer for each provider who took out a deal in November 2022 over the course of a 24-month Sim-only contract with unlimited data, calls and texts.
Based on snapshot pricing analysis, O2 customers could see the biggest potential price hike of up to £124.21. O2 is the only mobile network that uses RPI – which is typically higher than CPI and has been criticised as an inaccurate measure of inflation by the Office for National Statistics – to calculate price changes.
EE customers could face the next highest potential price hikes of up to £102.17. Three and Vodafone customers could face smaller price hikes of up to £87.57 and £80.27 respectively.
Even on a lower data contract, these price hikes are still significant. Which?’s snapshot pricing analysis found that for a 24-month Sim-only contract with at least 8GB data, consumers could face price hikes of up to £76.62.
These price hikes feel especially unfair when Big Four customers could be paying significantly less elsewhere if they were able to move from their contracts without paying additional exit fees.
For example, an unlimited data 24-month contract with a Big Four provider costs from £22 to £28 per month – before mid-contract price hikes – but equivalent rolling contracts with unlimited data are available for as little as £18 per month at rival networks. These contracts also offer the flexibility to switch if prices rise. Which? analysis shows that by switching away to a rival provider, Big Four customers could save as much as £120 a year, even before the upcoming price hikes are taken into account.
Which? believes it is unfair for consumers to have to commit to deals with unpredictable prices, meaning they do not know how much they can expect to pay over the course of their contract when they sign up. This is why the consumer champion has launched its ‘The Right to Connect’ campaign calling for an end to unpredictable mid-contract price hikes.
Ofcom is currently reviewing inflation-linked, mid-contract price rises amid concerns that they do not give consumers sufficient certainty and clarity about what they can expect to pay. It is due to publish its consultation on this issue in December.
Which? is calling on all providers to do the right thing and stop this practice ahead of Ofcom’s final decision, to ensure that customers are not impacted by similar unpredictable price rises next April.
In the longer-term, the consumer champion believes the regulator should ban these unpredictable mid-contract price hikes as they unfairly penalise consumers, make it hard for people to predict how much their telecoms contract will cost and dampen price competition in the market.
Rocio Concha, Which? Director of Policy and Advocacy, said:
“A good broadband and mobile connection is essential to modern life. It’s completely unacceptable that these unpredictable mid-contract price hikes have been allowed to continue in the telecoms industry for so long. These contract terms dump the burden of managing inflation risk onto customers, obfuscate prices and undermine competition.
“Which? is calling on all providers to do the right thing and cancel 2024’s above inflation price hikes. Ofcom should also use their review to finally ban these unjust mid-contract price hikes that harm consumers and undermine competition. Consumers need to know exactly how much their contract will cost when they sign up.”
