Virgin Media O2 has accused rival mobile operators of not doing enough to help customers switch to cheaper monthly plans.
The phone giant says other companies are “cheating” people by offering them rates that cover the cost of a cell phone even after they’ve paid for the phone.
The allegation has sparked a dispute with other firms, including EE and Vodafone.
They say Virgin Media O2’s claims are misleading and confusing.
Most cellphone customers sign a contract to pay a fixed monthly fee that includes airtime, usage, and a payment for the cost of the phone itself.
However, once the original contract expires, the customer owns the phone and can switch to a cheaper plan that only covers calls, texts and data.
According to a survey of more than 5,000 UK adults commissioned by Virgin Media O2, 3.9% of all UK mobile subscribers still had contracts with EE, Vodafone and Three that were renewed beyond their original schedule.
The company claims customers on these networks pay £530million each year for handsets they already own.
Although all operators have improved their communication with customers to let them know they are out of contract, all providers should ensure that customers do not continue to pay the higher price after purchasing the phone.
According to Virgin Media O2, split deals, which are automatically reduced when the phone is paid for, now make up more than 95% of its own contracts.
But its competitors hit back, saying they also offered such deals.
EE owner BT called Virgin Media O2’s claims “misleading” and said it already offers a contract called Flexpay, which is automatically discounted once people have paid for their phone.
“Like Virgin Media O2, we offer split contracts with EE Flexpay and provide all customers with clear end-of-contract notifications, including the best deal for them based on their usage,” it said.
Vodafone said it was disappointed to see Virgin Media O2 “confusing consumers with incorrect information”.
“As with Virgin Media O2, Vodafone customers on split contracts with Vodafone EVO will see no further mobile charges once their 0% finance contract ends and will therefore never pay too much for a phone. All mobile customers on legacy contracts will be contacted repeatedly when their contract is up to the end and after three months – if they haven’t subscribed to a new contract yet – we’ll automatically apply a monthly £5 rebate.”
A spokesman for Three said: “Three already offers split contracts where customers can take out a loan to pay for their device that is separate from their monthly airtime charges. The customer owns their device from the time they purchase it and once their device loan is paid off, the customer does not have to make any further payments for the cost of their device.”
- Since February 2019, providers have had to contact their customers by letter, email or SMS to warn them before the end of the contract.
- However, they do not have to tell you the cheapest offer to switch to. So it pays to contact your provider or shop around to get the cheapest deal.
- If you are unsure when your contract will expire, you can always send the word INFO to 85075. You should receive a response within minutes, letting you know when your contract is expiring and what the cost of early termination will be.
Kester Mann, a telecoms analyst at research firm CCS Insight, said Virgin Media O2 was right to highlight the “archaic practice” of charging customers for phones they’ve already paid for.
“You are right to make such a fuss about it. These post-contract customers who pay for cell phones are very lucrative for operators, which may be why they’re moving so slowly,” he said.
O2 introduced split contracts a decade ago, Mr Mann added, which puts them ahead of rivals in this area.
Since the cost of living crisis, customers have been more likely to stick with the same phone plan longer than switch to a more expensive plan, and as a result are more likely to drop out of the plan and end up overpaying.
According to Money Saving Expert, there are currently 14 million customers without a contract.
research by whom? in October 2020 indicated that 13% of customers are unlikely to take action if contacted by a supplier about the end of their contract, putting them at risk of overpaying, with the elderly and those on the lowest incomes disproportionately high are affected.
Rocio Concha, director of policy and advocacy at which?, said the cost-of-living crisis has highlighted unfair practices in the telecoms industry, including overcharging and in-line price hikes.
“We want to encourage anyone who is out of contract to start looking for a better deal immediately. Once you’ve paid off your handset, it’s especially worth looking into cheap SIM-only plans – which can cost as little as £5 a month. ” he said.
The row comes at a time when all mobile and broadband providers are under pressure to do more to cut costs and offer more options for lower-income customers.
Many providers increased bills by up to 17.3% in early April because they are allowed to increase contract prices by the rate of inflation plus around 4%.
Regulator Ofcom is currently investigating this issue but is unlikely to change anything for customers in the coming months.
Additional reporting by Lucy Hooker
Add Comment