Mobile customers face ‘lose-lose’ choice of price rises or ‘crippling’ exit fees

Mobile customers face having to choose between “huge” mid-contract price rises or “crippling” exit fees from April, a watchdog has warned.

Ofcom recently proposed a ban on the practice of inflation-linked mid-contract price rises, saying that they cause “substantial consumer harm”, but this will not come into effect before the next wave of hikes in April.

Which? said Virgin Media and O2 were expected to go ahead with price increases of up to 8.8% this April – the latest RPI figure of 4.9% plus an “arbitrary” 3.9% – the highest hikes in percentage terms out of any of the major firms.

The alternative for those under contract was an exit fee, which could be “exorbitant”, it said.

Which? analysis suggested that a customer with Virgin Media for their broadband and O2 for their mobile could face a combined exit fee as high as £692.37 if 12 months were still remaining on their contracts.

Since the companies merged, Virgin Mobile customers have been migrated to O2 and the providers have begun offering bundled deals.

Which? also said its calculations suggested an in-contract Virgin Media customer could see their annual broadband bill increase by £39.14, or face an exit fee of £403.91 if they were to leave their contract 12 months early.

Ofcom’s latest complaints figures showed Virgin Media was the most complained-about broadband, landline and pay-TV provider and received just one star for customer service in Which?’s annual broadband provider rankings.

Meanwhile the average O2 sim-only mobile customer faces a £26.44 annual price hike, the highest increase of any network by percentage but slightly less than Vodafone, which has higher prices overall on average, the watchdog calculated.

Which? said the average in-contract sim-only O2 customer currently paid around £25.04 a month, but would face an exit fee of £288.46 if they were to leave their contract 12 months early.

Virgin Media O2 said customers faced increases of “up to” 8.8%, because the additional 3.9% increase on top of RPI would not be added to the bills of “millions” of customers, and it only applied price increases to customers’ airtime plans, not their device plans.

The average effective mobile price increase would be 5%, not 8.8%, it said.

Ofcom is currently reviewing inflation-linked, mid-contract price rises but is yet to publish its final decision on its proposals to ban the practice.

Which? director of policy and advocacy Rocio Concha said: “Virgin Media and O2 customers face a lose-lose choice between huge price hikes and crippling exit fees. This comes on top of up to 17% increases faced by some O2 customers last year – few would have anticipated such steep price rises when they signed up.

“Ofcom has clearly stated that the practice of inflation-linked mid contract price rise terms can cause substantial consumer harm. Telecoms firms must do the right thing and immediately scrap these rises, rather than cynically taking the opportunity to cash in one last time at the expense of their customers before new rules take effect.”

A Virgin Media O2 spokesman said: “2023 was a record year for traffic on our networks as customers used our mobile and broadband services more than ever.

“We are investing heavily to ensure we continue to provide the fast and reliable connectivity our customers rely on, and the amount we receive from price increases is greatly outweighed by the £5 million we invest every single day to upgrade our networks and services to give customers a better overall experience.

“Which?’s own analysis shows that we continue to offer excellent value, with cable customers paying an average of just 10p more per day, and mobile customers facing an effective average increase of just 5p a day, for services they’re using almost constantly.

“This is further backed up by recent independent analysis which found that the cost of telecoms services has fallen by a fifth since 2017, while at the same time speeds and usage have increased significantly.”