Mobile customers stuck in Catch-22 between mid-contract price hikes and exit fees of over £400, Which? warns 

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.”

ENDS 

Notes to editors 

Which? cost of living campaign

The consumer champion recently launched a campaign calling on businesses in essential sectors – supermarkets, telecoms and energy – to do more to help their customers through the cost of living crisis.

As part of this, Which? is calling for 2023 mid-contract price rises to be cancelled for financially vulnerable consumers. This should apply to those consumers known to providers and all those who are eligible for social tariffs, but have not yet taken one. Providers should work with government and Ofcom to identify these customers using all data available to them.

Read more about the campaign here and more about Which?’s calls on businesses here.

Research

Bundled contracts 

Based on the average amounts paid by customers in a January 2023 survey of 3,400 mobile customers for phone contracts. Data includes a nationally representative sample plus a provider boost approach for brands with low sample sizes.

*For O2 and most Vodafone contracts, only the airtime part of a contract is subject to inflation. For this reason, it isn’t possible to cleanly calculate the increase and early exit fee from Which?’s survey as it isn’t clear what proportion of the average monthly cost came from the airtime.

Mobile providers inflating handset prices

For EE and Three (plus legacy Vodafone customers) inflation will also impact the handset repayment portion of the bill. This would mean customers paying extra on the repayment of the handset cost, as part of the increased monthly repayments.

Which? has estimated the cost of the handset using deal data available on the providers’ websites. As bundled contracts are not broken into handset and airtime costs, Which? used an equivalent SIM-only plan to to estimate how much of the contract is for airtime and for the handset. Calculations are based on an iPhone 14 Pro Max, 36 month contract, exiting with 12 months left.

An EE customer who took out a 36-month contract iPhone 14 Pro Max with unlimited data would pay an extra £8.74 per month (£105 a year) for their phone after the mid-contract price rises.

A Three customer who took out a 36-month contract iPhone 14 Pro Max with unlimited data would pay an extra £7.24 per month (£86) for their phone after the mid-contract price rises.

O2 does not charge exit fees for the airtime part of the contract.

SIM-only increases

Which? conducted analysis of pricing data to calculate the annual impact of these price rises for the average customer of each provider.

*SIM-only prices based on an average SIM-only contract where the contract is longer than 30 days for any amount of data.

Exit fees 

Exit fees have been calculated using the providers’ terms and conditions:

• EE’s terms and conditions for calculating exit fees are – remaining monthly charges, minus VAT (20%), minus 4% and then plus VAT (20%).

• O2 calculates exit fees using the monthly tariff cost, multiplied by the number of months remaining in your Minimum Period, minus 4%.

• Vodafone calculates exit fees using the outstanding monthly charges for the remainder of the contract minus 2%.

• Three’s calculations for exit fees are the total monthly charges remaining during the minimum term minus 3%.

Rights of replies

An EE spokesperson said: “We strongly refute the research findings. SIM plans and handset plans meet different needs and handset customers get more benefits included. Currently, we don’t widely offer plans where customers pay separately for the handset and our customers pay their monthly fee for the services they get.

“We understand that price rises are never wanted nor welcomed, but recognise them as a necessary thing to do given the rising costs our business faces.

“EE has been upfront about price changes when customers agreed to their contract and before a price rise, so customers always know where they stand. Vulnerable customers suffering from financial hardship or digital exclusion are protected through our market leading social tariffs. Any customer worried about paying their bills should contact us and we will help find a solution which works for them.”

A Virgin Media O2 spokesperson said: “We know that price increases are never welcome but, unlike other providers, we freeze the cost of device repayments and are only changing our airtime prices, meaning average bills will go up by an effective 10.0% or less than 10 pence per day. This is below inflation and reflects the fantastic value we provide for connectivity that is used almost constantly.

“These changes occur as our own business costs rise and we invest heavily in our mobile network to keep pace with ever increasing usage, rollout new technologies like 5G and deliver valuable services that matter to our customers – whether that’s flexible plans, inclusive EU roaming or access to exclusive events and savings through Priority.”

O2 said most of its contracts are 12 months or less, so it was unlikely the majority of its customers would face a 12 month exit fee.

Vodafone declined to comment. 

A Three UK spokesperson said: “We understand that the cost-of-living crisis is having an impact on our customers at present. However, with energy and supplier prices increasing substantially and network roll out costs rising significantly across the board we have taken the difficult decision to pass some of this increase onto our customers’ bills.

“Like other mobile providers, our pay monthly plans are subject to an annual price change. Our prices remain some of the most competitive in the market, with 81% of our customers receiving an increase of no more than 4.5% this April. This increase will allow us to continue to invest to ensure we have a strong network, capable of delivering better connectivity, every day, for every customer.”

About Which?

Which? is the UK’s consumer champion, here to make life simpler, fairer and safer for everyone. Our research gets to the heart of consumer issues, our advice is impartial, and our rigorous product tests lead to expert recommendations. We’re the independent consumer voice that influences politicians and lawmakers, investigates, holds businesses to account and makes change happen. As an organisation we’re not for profit and all for making consumers more powerful.

The information in this press release is for editorial use by journalists and media outlets only. Any business seeking to reproduce information in this release should contact the Which? Endorsement Scheme team at endorsementscheme@which.co.uk.

Press Release: Cost of living, Mobile, Rocio Concha