Millions of consumers with O2 and Virgin Mobile contracts are to be hit with an inflation-busting 17.3% increase in their bills for making calls, sending texts and using data, adding to pressure on households amid the cost of living crisis.
The price hike is the latest in a series of big increases imposed on consumers for vital utilities, and will add to pressure on the government to step in with tougher protections.
The telecoms operators – merged under the same umbrella company since 2021 – confirmed the cost of their airtime contracts, or what customers pay for calls, texts and data, would go up by the annual rate of retail prices index (RPI) inflation announced this week, plus 3.9 percentage points.
O2 customers who signed up before March 2021 will pay the RPI increase, but not the 3.9% supplement.
Official figures on Wednesday showed RPI stood at 13.4% in January, landing consumers with a 17.3% increase in their airtime bills in total – almost triple the rate of growth for average workers’ pay. Consumers will see the increase from April.
Rishi Sunak has promised to halve inflation this year as the cornerstone of his economic policy, while insisting teachers, nurses, and other public sector workers must accept pay deals significantly below inflation to achieve this goal.
However, the rise in mobile and broadband costs far outstrips the government’s preferred consumer prices index (CPI) measure of inflation, which fell slightly to 10.1% in January but remains at among the highest rates since 1981.
It comes amid growing concern over the looming rise in telecoms bills from other providers this spring, with consumer groups warning that hard-pressed families will be forced to cut back on everyday essentials such as food, energy and clothing.
“Prices jumping by so much in one year is a serious concern,” said Lucy Powell, the shadow culture secretary.
“Mobile is an essential to modern life, yet many people won’t be able to afford soaring mobile bills on top of energy price, food and fuel prices going up and up.”
Against a backdrop of growing pressure on telecoms providers, Ofcom, the industry regulator, launched an investigation last week into the widespread practice of above inflation price rises.
Operators including BT, EE, Vodafone and TalkTalk are all poised to make above-inflation mid-contract price increases, allowing them to make billions of pounds more annually. It is estimated consumers will be £600m more out of pocket than if the providers simply tracked headline inflation.
Consumer law does not prevent companies from increasing their prices midway through a contract, provided they do so fairly. However, around a third of mobile and broadband customers do not know their provider can do so.
Most of the UK’s biggest mobile operators have chosen to increase prices by CPI or RPI, plus 3.9 percentage points. Rocio Concha, director of policy and advocacy at the consumer group Which?, said such large increases during the cost of living crisis were worrying.
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“This means millions of consumers could now find themselves trapped in a lose-lose situation where they either have to accept exorbitant mid-contract price hikes this spring or pay costly exit fees to leave their contract early.
“Which? is calling on telecoms providers to consider very carefully if this level of price increases can be justified. They should let their customers leave without penalty if they face these price hikes, and cancel 2023 mid-contract price rises for financially vulnerable consumers.”
Like all businesses, telecoms providers are facing a range of cost rises, including investment in their networks to provide better, faster services and allow consumers to use record volumes of data.
A Virgin Media O2 spokesperson said that, unlike other providers, the cost of device repayments was frozen, meaning that average bills would go up by about 10%, or less than 10p a day. “This is below inflation and reflects the fantastic value we provide for connectivity that is used almost constantly.”
A spokesperson for the Department for Science, Innovation and Technology, said pricing was a matter for individual companies and regulated by Ofcom. “However, we understand that price rises will have a big impact on households when families are struggling to pay their bills.
“That’s why the secretary of state recently urged telecoms bosses to reconsider increasing prices above inflation during this difficult period. Thanks to our negotiations, telecoms firms have also committed to provide help with bills for customers who ask for it.”
The headline of this article was amended on 20 February 2023 to reflect the fact that, as the article states, not all customers will pay the full 17.3% increase.
