Which? is calling on telecoms firms to act on mid-contract price rises, as new research shows millions of mobile customers are trapped in a Catch-22 where they either have to accept exorbitant mid-contract price increases or pay exit fees of over £400 to end their contract.
The Big Four mobile firms – EE, O2, Three and Vodafone – raise prices every April in line with the Consumer Price Index (CPI) or Retail Price Index (RPI) plus an additional 3.9 per cent.
EE, Three and Vodafone use CPI – leading to price increases of over 14 per cent in 2023 – while O2 uses the higher RPI measure, meaning some customers will face hikes of more than 17 per cent this year.
As these price rises are often applied mid-contract, people either have to accept these hard to justify increases or pay costly exit fees to leave their contract early. Shockingly, these inflationary price hikes also mean some providers will arguably overcharge customers for handsets that are part of bundled contracts.
The consumer champion has calculated how much an average EE, O2, Three and Vodafone customer affected by the latest price increases could see their payments rise in 2023 for both SIM-only and bundled contracts.
These price hikes are highest for bundled contracts – where the customer pays monthly for both the handset and airtime. Based on figures from Which?’s latest mobile survey, the average EE customer would see an annual increase of £66.36 while the typical Three customer would see a hike of £56.40 to their bundled contract due to mid-contract price rises.
The same EE customer would face eye-watering exit fees of £424.67 to leave a year early and Three’s customer would need to fork out £379.46 to leave their contract.
For EE and Three bundled customers – plus legacy Vodafone customers – these price hikes are applied to the whole bundled deal. As these bundled contracts are not broken into handset and airtime costs, Which? used an equivalent SIM-only plan to to estimate how much bundled customers will pay for their handset due to these inflationary price rises.
Using the example of an EE customer who took out a 36-month contract for an iPhone Pro Max with unlimited data, Which? estimates the customer would pay an additional £105 for the handset over the next year. A Three customer with the same contract would pay an estimated £86 extra for the handset over the next year. Prices for both providers will rise again the next year, meaning that customers will pay even more just for their handset.
For O2 and most Vodafone contracts, only the airtime part of a contract is subject to inflation – so the level of mid-contract price hikes and exit fees will vary according to the individual contract.
Which? has also analysed pricing data to calculate how much an average SIM-only customer with EE, O2, Three and Vodafone affected by the latest price increases could see their payments rise in 2023.
The average EE customer would see the biggest potential annual increase of £46.20. This is closely followed by O2 and Vodafone customers who would see annual price hikes of £42.72 and £42.36 respectively. The average customer with Three would see the lowest annual increase of £25.20.
EE SIM-only customers would face the highest exit fees of £295.36 if they wanted to leave a year early. This is closely followed by Vodafone and O2 customers who face exit fees of £287.88 and £237.08. Three customers face the lowest exit fees of £169.59 for leaving their contract a year early.
With Ofcom currently investigating mid-contract price hikes and their fairness for consumers, telecoms firms are facing a reckoning on these practices.
Which? is calling on all providers to do the right thing and reconsider any price rises they impose. Providers should allow customers to leave their contract without penalty if prices are hiked mid-contract – regardless of whether or not these increases can be said to be ‘transparent’ – and cancel 2023 inflationary hikes for financially vulnerable consumers.
Currently, Sky Mobile does not use inflationary mid-contract rises – and where prices rise, customers can leave penalty-free. Tesco Mobile used to operate on this model but has now introduced inflationary price hikes for some customers in 2023.
On smaller networks – like Giffgaff, VOXI or Smarty – these types of typical inflation-based rises will not apply, and customers are able to switch without penalty.
Rocio Concha, Which? Director of Policy and Advocacy, said: “It’s hugely concerning that many mobile customers could find themselves trapped in a Catch-22 situation where they either have to accept exorbitant – and difficult to justify – mid-contract price hikes this Spring or pay costly exit fees to leave their contract early and find a better deal.
“With many households struggling to make ends meet, it is completely unfair that people are trapped in this situation. Which? is calling on providers to act quickly and reconsider any price rises. Firms should cancel 2023 hikes for financially vulnerable consumers and allow all customers to leave without penalty if they face mid-contract price rises.”