New breed of mobile tariff could cost customers £231 million

The rise in a new breed of ‘flexible’ mobile contract that stops customers paying twice for the same handset could end up costing users £231 million more a year on airtime alone, according to new research by Uswitch.com, the price comparison and switching service.

‘Flexi’ tariffs – offered by O2, Sky, Tesco and Virgin – separate the cost of the airtime and the handset by running different contracts for both, so once the device is paid off customers automatically just pay for the cost of the minutes, texts and data. This stops customers slipping into the scenario of forking out twice for the same handset – as well as allowing them to upgrade to a new device early, as long as they pay off whatever is owed on the device.

However, when compared to the cost of a SIM-only deal from the same provider, mobile customers on these ‘flexi’ tariffs could find themselves paying £69 extra a year on airtime alone – or 38% more than they need – for the convenience of not having to worry about paying twice for the same handset.

As it stands, one in six (15%) mobile customers have fallen out of contract and are overpaying by a combined £27 million a month. ‘Flexi’ tariffs, positioned as a remedy to avoid this overpayment, would still mean that consumers are spending £19 million a month more than they need to.

In order to prevent consumers from paying inflated out-of-contract charges,  Uswitch.com is calling on mobile providers to issue effective end of contract notifications, similar to those in the insurance and energy markets.

Table 1: The following table shows the difference between the airtime cost of flexi contracts and similar SIM-only contracts from the same provider:

* 12 month contract on 3 mobile (12GB data with unlimited texts and calls) ** Not available as a SIM-only deal

Source: Uswitch.com, correct as of 18/07/18

Ernest Doku, mobiles expert at **Uswitch.com**, comments: “On the face of it, these contracts have two main appeals – they give customers the ability to upgrade to the latest smartphones early and they take away the risk of ‘double paying’ once the device part of the contract ends.

“The issue is that once customers are only on the airtime part of the deal, they often are paying a significant premium compared to similar SIM-only deals and this is before you consider that this deal was likely taken out two years ago when the cost of data is likely to  have been a lot higher.

“The fact that these deals reduce the risk of customers paying inflated out-of-contract prices is commendable – but they’re far from the best value deals, even with the same network. It is very clear that providers should be doing much more to let consumers know when they are about to drop out of contract. Ofcom is soon due to consult on how providers need to tell customers when their deals are coming to an end – with one in six mobile users currently overpaying for contracts, this can’t come soon enough.

“It’s positive that these changes are planned to make end-of-term information a mandatory provision, but it will be neither here nor there if these warnings are buried in the small print, tucked away in billing information, or providers find loopholes.

“Flexi tariffs are also a response to how mobile users increasingly demand versatility in their mobile use. A more cost effective way to get this sort of flexibility is by taking out a rolling monthly SIM-only contract and pairing it with a handset. Most importantly shorter contracts generally give you more freedom.”

Uswitch’s Connectivity without Complexity campaign has been looking at these key issues and exploring their impact on consumers. We believe it’s time the industry gave the facts – being open and upfront with the information that matters, removed the needless hoops that consumers are made to jump through and worked to ensure the road to faster, more reliable connectivity is a journey for all. To find out more, visit **www.uswitch.com/connectivity**.

FOR MORE INFORMATION

Ailene Barr

Phone: 020 3872 5610

Email: ailene.barr@uswitch.com

Twitter: @uswitchPR

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