Millions of Britons are overpaying on mobile phone contracts because operators are unfairly enforcing higher tariffs on “bundle” package customers, according to new data released by Virgin Media O2.
Telecoms operator Virgin Media O2 released its findings on Friday and called on competitors to stop “swindling” consumers as the UK grapples with a cost of living crisis.
EE, Vodafone and Three UK offer “bundled contracts” that combine the price of a handset with airtime costs for minutes, texts and data. These packages allow customers to pay the cost of a smartphone over a period of 12, 18 or 24 months.
But the research, conducted by Virgin Media O2 and Strand Partners, found operators were routinely failing to reduce contract charges for customers even after the cost of their device has been repaid. It estimated that this could equate to as much as £530mn being overspent by consumers each year.
Telecoms groups are seeking to rebuild their reputation after the industry regulator launched an investigation into whether companies are treating customers fairly.
Virgin Media O2’s findings follow those of consumer rights group Which? that in 2020 found one in three “bundled” customers were still being charged the full price of their contract two months after paying off their handset.
“The cost of living crisis has thrown a spotlight on unfair practices across the telecoms industry — including overcharging for handsets which have already been paid off and above-inflation mid-contract price hikes,” Which? said on Friday.
“While it’s positive that Virgin Media O2 does not apply inflationary price hikes to the handset portion of bundled contracts, O2 were among the Big Four mobile providers who pushed ahead with eye-watering mid-contract price rises last month,” it added.
Virgin Media O2 has since 2013 split the cost of handsets from airtime in bills and said it automatically rolls customers to SIM-only contracts — where you only pay for the costs of the data, texts and minutes you use — when they have paid for their device.
“We’re in a cost of living crisis and we don’t want to be ripping people off,” said Gareth Turpin, chief commercial officer at Virgin Media O2. “We want to work in an industry where customers trust us.”
Vodafone said in a statement that it was “disappointed to see VM02 confusing consumers with incorrect information and sensationalist headlines at a time when, as an industry, we all need to be providing consumers with greater clarity to enable them to make the best choices for their needs”.
It added that it offered customers split contracts and all handset customers on legacy contracts “are contacted repeatedly” when they have finished paying for a handset or their contract ends.
After three months, if customers have not moved on to a new tariff, a monthly £5 discount was automatically applied, Vodafone added.
Three said it has started offering “split contracts”, which separate airtime and handset costs. However, the majority of its customers are currently on combined contracts.
BT, which owns mobile operator EE, said it does offer a small proportion of customers split contracts and provides clear end-of-contract notifications, including the best offer for clients based on their usage.
Virgin Media O2 said the average consumer overpays for their handset for six months, with a handful overpaying for up to five years.