UK MNOs accused of using handset subsidies to rip off their customers

Research from Citizens Advice reckons four million people in the UK are still paying back their phone subsidies after the end of their contracts.

This will come as no surprise to anyone who has reached the end of a postpaid contract that came with a subsidised handset. It’s universally understood that such things are part service contract and part financing on the device, but MNOs are generally deficient in contacting their customers when the contract period is over.

They do get in touch, but usually with misleading offers such as ‘free’ new handsets, when in fact they’re merely calling for the customer to initiate a fresh postpaid contract, complete with a subsidised handset. An honest exchange would also offer a SIM-only deal that would offer far more data for far less money in the absence of a new device.

Citizens Advice specifically calls out EE, Vodafone and Three, implying O2 does a better job on this matter. It reckons these four million mugs are being overcharged, on average, by £22 per month, which seems about right. It also found that most of the time we’re paying more for the handset by getting it subsidised by the operator than if we just bought it on the open market, but there’s no surprise there.

“It is unacceptable that mobile providers are knowingly overcharging customers for phones they already own,” said Gillian Guy, Chief Exec of Citizens Advice. “We’ve heard a lot of talk from government and the regulator but now we need action. Other companies have already stopped doing this so we’re looking for these three major providers to follow suit. In the meantime, consumers should check their phone bills to see if they can save money with a SIM-only contract or upgrade to a new phone.”

Like most studies accusing utilities of ripping off their customers this ultimately comes down to telling them not to be lazy and check their contract every now and then. It’s not difficult to give yourself a reminder to renegotiate your contract when it expires so those who don’t should receive limited sympathy. On the other hand, from an industry that constantly wrings its hands about churn, this is hardly an example of customer service best practice.

UK operators accused of ripping off loyal punters at the end of bundle deals

The UK Citizen’s Advice service has advised that UK citizens are getting rinsed by their operators when they come to the end of subsidised phone contracts.

One of the major reasons we sign up to two-year contracts is that we want a shiny new smartphone but haven’t got the cash to pay for one up-front. For decades operators have looked to entice customers by effectively offering to finance the purchase of said smartphone in return for a post-paid contract commitment. The total cost of ownership is invariably greater than buying the handset yourself and then going SIM-only, but that’s a price many are willing to pay.

But according to Citizen’s Advice, unless they specifically ask for a new contract, customers of Vodafone, EE and Three continue to be charged at the same rate even after their lock-in period has expired. In other words, even after they’ve paid the phone off they continue to be charged as if they hadn’t.

“Some of the largest mobile phone providers are routinely overcharging their loyal customers,” said Gillian Guy, Chief Exec of Citizens Advice. “Mobile phones are now an essential part of modern life, but the way that the cost of handsets are hidden within some mobile phone contracts gives phone providers a way to exploit their customers.

“It is clearly unfair that some phone providers are charging loyal customers for handsets that they have already paid for. It’s especially concerning that older customers are more likely to be stung by this sharp practice.

“Phone providers must now make sure that any customers staying in a contract past the end of a fixed deal have their monthly bill reduced to reflect the cost of the handset. Providers could make it much easier for consumers to compare prices by separating out the cost of handsets from the cost of services like data and minutes for all contracts, that way it would be much clearer what they’re paying for.”

To be fair to operators our experience is that they usually get in touch towards the end of a contract to dangle further smartphone carrots in a bit to get you to sell your soul for another couple of years. But if they don’t then Citizen’s Advice is right to say there should be an automatic reduction in the bill. That process is presumably so straightforward that it’s hard to give those operators that don’t do it the benefit of the doubt.

Here’s a summary of the findings. Citizen’s Advice offered no explanation of why O2 and the MNVOs weren’t apparently scrutinised. Perhaps they got bored and figured they’d made their point anyway.

Citizens advice operator table