Millions of pounds wasted paying for mobiles people already own

New research for our Unlock Better Mobile Deals campaign shows that consumers collectively waste £355 million a year shelling out for handsets they’ve paid off.

We found nearly half of people (46%) who came to the end of their mobile contract did not switch immediately, collectively overpaying by a total of £355 million per year – an average of an extra £92 each towards handsets they had already paid for.

Most contracts combine the cost of the tariff and the handset over the minimum term, usually 24 months. But this is not always split out, so people don’t know how much each element costs or when they have finished paying for their phone. Six in 10 (60%) people we surveyed told us that having a provider who separates its bill so you can clearly see the tariff and handset costs was important to them when switching.

O2, Virgin Media, Tesco Mobile and Utility Warehouse have tariffs where the handset and airtime costs are separate while giffgaff have never bundled the handset in. Customers on Vodafone, EE and Three still continue to be charged one bundled price.

For example, a contract with O2 Refresh for an iPhone 6 costs £49 a month for 5GB of data and unlimited minutes and texts. Of this, O2 is clear that the handset part of the bill is £25, so when the contract is over you only pay £24 per month. On a similar plan with Vodafone (4GB of data and unlimited minutes and texts) it costs £48.50 a month – but that price doesn’t change once you come to the end of your contract and have finished paying off the cost of the handset.

Nearly everyone we surveyed (97%) said that price was important when looking to switch and providers alerting customers that their contract is coming to an end also ranked highly (74%).

Which? executive director Richard Lloyd, said:

“Consumers are being misled and as a result are collectively paying millions of pounds each year for a phone they have paid off. All mobile phone operators should separate out the cost of the handset so people don’t continue to pay after the contract comes to an end. Mobile  providers need to play fair and ensure their customers are not paying over the odds.”

As part of our Unlock Better Mobile Deals campaign, we also want mobile companies to ensure consumers are getting a better deal by:

• Unlocking all handsets automatically for free.
• Improving their customer notification practices, giving people at least a month’s notice that their contract is coming to an end and providing information on all the best deals that match their needs.

Notes to editors:

1. More than 56,000 people have signed up to our Unlock Better Mobile Deals. To support the campaign visit www.which.co.uk/unlockmobiles
2. Populus, on behalf of Which?, surveyed 2,055 UK adults online between 25 and 27 February 2015. Data were weighted to be demographically representative of the UK population.
3. GMI, on behalf of Which?, surveyed 3,605 UK adults who own at least one pay-as-you-go or contract mobile phone between 28 February and 3 March 2015.
4. To calculate the £355 million figure, we worked with Billmonitor to estimate the portion of handset cost within pay monthly contracts by collating data on consumer handset purchases and offers in the market. This was used alongside Populus survey data on the number of months lapsed, ONS 2013 mid year population estimates, and OFCOM statistics on the numbers of people with contract mobiles to extrapolate to a sum £ amount per year for the UK.
5. Comparison example of how much you could be paying if the handset is separated out, based on two market leading deals:  

Press Release: Consumer, Technology, Telecoms, Which?