Loyal mobile customers overcharged by up to £38 a month
Many people take out a mobile phone contract where the cost of the new handset is included in the overall price of the fixed-term deal. For example, the contract is paid off monthly over a period of two years.
At the end of the fixed-term deal people have the option to stay with their network on the same contract, take out a new contract or move to another provider altogether.
But charity Citizens Advice warned that customers of EE, Three and Vodafone who choose to stay on the same plan after their deal’s up, don’t get the bill reduced.
Customers of Vodafone, EE and Three who stay on the same contract with their provider after their fixed term deal ends are still charged the same amount as when they were paying for the handset.
This means loyal customers are paying on average an extra £22 a month for a phone they’ve already paid off.
The extra cost can be as much as £38 a month on average for contracts including handsets such as the iPhone 7 128/256GB, the Galaxy S8 and the Xperia XZ Premium.
When it comes to the new iPhone 8, Citizens Advice found that customers with a 256GB model could end up being overcharged by £46 a month on average.
Further, mobile phone owners over the age of 65 are most likely to be stung – 23% of over 65s with a handset-inclusive mobile phone contract stayed in their contract for over 12 months past the end of the fixed deal period, compared to 13% of people aged under 65.
The table below shows the average monthly loyalty penalty for consumers who have stayed in the same contract after the initial fixed deal ends:
The charity is calling on mobile phone companies to separate out the cost of a handset from the cost of mobile phone services. It said that displaying these costs separately when advertising the contract would enable consumers to compare the price of contracts more easily.
Gillian Guy, chief executive of Citizens Advice, said: “Some of the largest mobile phone providers are routinely overcharging their loyal customers.
“Mobile phones are now an essential part of modern life, but the way the cost of handsets are hidden within some mobile phone contracts gives phone providers a way to exploit their customers.
“It is clearly unfair that some phone providers are charging loyal customers for handsets they have already paid for. It’s especially concerning that older customers are more likely to be stung by this sharp practice.
“Phone providers must now make sure that any customers staying in a contract past the end of a fixed deal have their monthly bill reduced to reflect the cost of the handset.”
What do the mobile phone companies say?
EE: “Separating phone and tariff doesn’t always represent the best deal for consumers, it can sometimes result in them paying more, and EE customers have the flexibility to choose the tariff and upfront phone cost that’s right for them. We send our customers regular updates about their options before and after they reach the end of their contract, and the vast majority of our customers upgrade to a new phone or move to a SIM-only plan near the end of their contract. All of our customers can move to a SIM-Only plan as early as 45 days before the end of their contract, and our customers can also take advantage of the annual upgrades included in our 4GEE Max plans, allowing our customers to upgrade their device every 12 months at no additional cost.”
Three: “Whenever a new customer signs with us, we make the end-date of the contract term very clear. We also let them know that they can contact us at any time to discuss the range of options available should they wish to change their plan with us.
“We encourage all Three customers to contact us if they would like to change their plan at the end of their fixed term deal. They can also check how much time they have left on their plan via the My3 app. We appreciate any feedback to help us improve our processes and are exploring new ways to ensure our customers can get the most out of their mobile phones at a competitive price.”
Vodafone: “We strive to give our customers the price plan that best suits them. Wherever possible, we contact customers nearing the end of their contract to offer them a range of options. These include being able to upgrade their handset, receiving an extra allowance to enhance their existing plan or, if they choose, switching to a SIM only plan.
“Customers can also change phones after just six months with our flexi-upgrade. In addition, we were the first to abolish roaming within Europe, the first to allow customers to roll over unused data, texts and voice minutes on pay as you go and we will soon launch the first pay as you go service capped at £1 per day.”
O2: While this network provider wasn’t identified in the report, Nina Bibby, CMO, O2, said: “Forcing customers to continue to pay for a phone they already own not only hits their pockets but undermines trust and the reputation of the industry. O2 Refresh separates airtime and device costs giving customers complete transparency and control over their monthly bill. We’d like to see the other operators review their position and follow our lead.”