A third of us ‘are overpaying for mobile phones’ via a loyalty penalty that can cost more than £400 a year, consumer watchdog warns
- Third of mobile phone owners are being hit by penalty which could cost £400
- Which? said millions pay same monthly charge long after initial contract ends
- Phone companies make £182million per year from customers continuing to pay for a handset they already own, according to Which?
A third of mobile phone owners are being hit by a loyalty penalty – which can cost them more than £400 a year.
The problem relates to the way smartphone and usage bundles are sold, according to Which?
Typically people pay a small fee upfront for the handset and sign a long-term contract – often 24 months – carrying a fixed monthly charge to cover their usage and the remaining handset cost.
However, the consumer group said millions of people continue to pay the same monthly charge long after the initial contract ends and they have paid for the handset.
Which? calculated that phone companies make around £182million a year from customers continuing to pay for a handset they already own.
A third of mobile phone owners are being hit by a loyalty penalty which can cost them over £400 a year. The problem relates to the way smartphone and usage bundles are sold (street view of a Vodafone store in Melbourne, Australia, April 7, 2018)
Typically people pay a small fee upfront for the handset and sign a long-term contract – often 24 months – carrying a fixed monthly charge to cover their usage and the remaining handset cost (pictured: file photo dated May 29, 2018 of an EE phone store)
However, the consumer group said millions of people continue to pay the same monthly charge long after the initial contract ends and they have paid for the handset (pictured: file photo dated May 29, 2018 of a Three phone store on Oxford Street, London)
Telecoms regulator Ofcom last year won voluntary commitments from most mobile sellers to reduce prices for out-of-contract customers. These came into effect in February.
But Which? said providers have taken different approaches to applying these commitments.
It found a third of customers whose contracts had ended in the last two months are effectively overpaying on their bill.
The worst affected were Three customers, where around four in ten of those whose contracts ended in the last six months said they saw no price drop.
Based on current contract costs, Which? said a Three customer with a Samsung S20 5G phone could end up overpaying by £37 a month – £444 a year – once the contract term is up.
Two in five EE customers saw no drop in price when the initial contract and bundle came to an end. For Vodafone, it was three in ten.
EE and Vodafone offer small discounts to customers when contracts end, but they only take effect after three months.
Which? said an EE customer with a Samsung S20 5G phone could end up overpaying by £26.20 a month – equivalent to £314 a year.
Which? calculated that phone companies make around £182million a year from customers continuing to pay for a handset they already own (stock)
A Vodafone customer with an iPhone 11 could pay £32 extra a month – or £384 a year.
Which? head of home products and services, Natalie Hitchins, said: ‘If you think you might be out of contract or overpaying, check your phone bills to see if you can save money with a SIM-only deal or with an upgrade to a new phone.’
Three said it sends all customers a notification at the end of their contract which shows their options and the corresponding prices.
EE said the Which? allegations were ‘entirely wrong’ and that it contacts customers before and after the end of their contract to inform them of their options.
Vodafone declined to comment.
Ofcom insisted the commitments it won from mobile networks have cut bills for millions.
But it admitted its powers are limited and criticised Three for not doing more.