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£1bn cost of mid-contract price hikes

Cherry Reynard
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Cherry Reynard

UK mobile users could be significant out of pocket as a result of networks imposing price hikes in the middle of a contract term.

New research from specialist mobile analysts Tarifica, commissioned by Tesco Mobile found that annual inflation-based mid-contract price hikes for pay monthly customers total almost £1bn since 2013.

The research showed mobile users on certain tariffs face another round of price hikes from the end of March, with Vodafone, EE, Three and O2 all announcing increases of 2.5% and above.

These price rise could cost mobile customers a further £173m, bringing the total cost for UK consumers to over £1.1bn.  

Tarifica looked at the scale of RPI increases for each network, the average monthly cost for monthly contract customers, the average length of time between contracts, and the number of contracts per mobile operator to arrive at their estimate.

William Watts, director at Tarifica comments: “We estimate that since 2013 once the latest set of price increases have been taken into account, these inflation-based price increases will cost the UK’s mobile consumers in excess of £1.1 bn.

“When calculating the cost to consumers, the most important factor to consider is that price escalations are applied every month until the contract has run its course. So, while many operators advertise the fact that these changes are only costing customers ‘between £1 and £2 per month,’ the cost over the life of a contract can approach £50 or more in some cases.

“Further, these escalations are stacked on top of each other year on year, meaning that the following year’s price increase is built off the one from the previous year, similar to compounding interest in a savings account”. Tesco Mobile introduced its Tariff Promise in 2013, the mobile industry’s first guarantee not to raise prices mid-contract.