O2 and Virgin customers hit hardest by ‘immoral’ mid-contract price rises

A typical UK household will be nearly £470 worse off compared to two years ago as a result of mid-contract price hikes imposed by mobile phone and broadband providers.

Millions of Brits will see around £32.76 added to their annual mobile phone bill - roughly £2.73 more a month - when mid-contract price rises come into effect in April. It means the average Brit will be paying around £446.84-a-year.

And a typical broadband contract will increase by £35.16 a year, or £2.93 a month. 

Office for National Statistics figures released in February determine how much providers can hike their prices this April - heaping more misery on hard-pressed Brits already battling the cost-of-living crisis.

Many providers will use Jan's Consumer Price Index (CPI) figure of 4%, plus an additional charge of 3.9%, meaning bills will rise by 7.9%. Inflation increased unexpectedly in December after economists predicted a fall to 3.7%. 

But O2 and Virgin customers face forking out even more due to the way their network providers calculate the annual increase – using the higher Retail Price Index (RPI) measure of inflation published in February, described by the ONS as ‘a very poor measure of general inflation’.

With RPI set at 4.9%, O2 and Virgin customers will see an 8.8% price hike, adding around £3 to their monthly bills, and £37 annually. 

A typical UK household - comprising four people with four mobile phone contracts and broadband - will end up £470 worse off over two years as a result of these mid-contract price hikes, according to analysis by Nous.co.

This year’s rise is considerably less than the hike of between 14.4% and 17.3% imposed on customers last year, driven by the UK’s 10.5% inflation rate at the time.

When customers take out a contract at an advertised price, what can be overlooked in the small print is the inflation-linked price hike plus the provider’s additional 3.9% applied in April.

Under Ofcom rules, providers can calculate the inflation-linked increase using the Consumer Price Index (CPI) or Retail Price Index (RPI).

The RPI is the older and typically higher measure of inflation. Last year both O2 and Virgin applied the RPI to its mid-contract rise, hiking monthly bills by 17.3% - compared to the CPI-linked 14.4% increase applied by rivals.  

Ofcom wants to make ‘complex’ inflation-linked mid-contract price hikes a thing of the past by forcing providers to make prices clear from the point of sale. The UK communications regulator plans to publish its decision on this in the spring.

Our Nous data shows the average monthly phone bill from a customer who is in contract in the UK is £34.51 – and expect that to rise to £37.24, or £446.84 annually.

The average family, with four mobile contracts between them, will be £369.40 worse off over two years.

A typical broadband bill if you are in contract is currently £37.09, expected to rise to £40.02, or £480.24 annually.

Greg Marsh, CEO and cofounder of Nous said: “This is cynical and grasping behaviour from broadband and mobile companies. 

“Suppliers sneak these price hikes into contracts, deliberately make them confusing, and often charge extortionate exit fees for customers who want to leave.

“Virgin Media and O2 are the worst offenders – they base their price rises on the higher RPI inflation figure in order to charge customers even more. 

“Our Nous analysis suggests that a typical household is £470 worse off over the last two years as a result. Ofcom needs to speed up their work to crack down on this unfair behaviour, and suppliers should do the right thing and cancel this year’s price rises.”