Personal Finance

Mobile giant claims rivals overcharging £530m for contracts - are you overpaying?

Mobile phone companies are "swindling" customers out of £530 million a year with out-of-date contracts.

Virgin Media O2 has accused rivals of not doing enough to move customers onto cheaper tariffs after they've finished paying for their handsets.

Most mobile phone customers sign up to a contract to pay for monthly usage as well as a portion of the value of the phone itself.

Once the contract comes to an end and the handset has been repaid in full the customer is entitled to switch to a cheaper deal that just covers their text, call and data usage.

But a survey by Virgin Media O2 found 3.9% of mobile contract customers were still on their initial deals with EE, Vodafone and Three despite paying off the handset.

Virgin Media O2 claims this equates to £530m being overpaid by customers.

With the cost of living crisis biting, Britons are more likely to hold on to their phones out of contract to avoid signing up to a new, more expensive tariff.

NimbleFins previously reported that mobile phone bills were rising by up to 14.4% this year due to rules linking prices to inflation. Ofgem said it was "concerned" about the level of price increase allowed.

Virgin Media O2 says rivals should bring in measures to block customers from overpaying. It offers deals which automatically reduce when the handset has been paid for, and says these make up 95% of its contracts.

To find the best mobile phone contract and SIM deals for you, we've partnered with Uswitch.

However, its rivals say the figures are misleading and they also offer so-called split contracts.

EE owner BT said it already offered the same sort of deal with its Flexpay contract.

Meanwhile Vodafone said it also had a split contract offer which reduces once the handset had been paid for.

A spokesperson added: "All handset customers on legacy contracts are contacted repeatedly when their contract comes to an end, and after three months - if they haven't moved onto a new contract already - we automatically apply a monthly £5 discount." Three also claimed it had a split contract offering.

Kester Mann, telecoms analyst at CCS Insight, told the BBC Virgin Media O2 was "right to kick up a fuss over this" and said O2 was ahead of its rivals after introducing split contracts 10 years ago.

He said: "These customers that are paying for handsets after contracts end are very lucrative for operators, which is why perhaps they've been so slow to move."

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Helen Barnett

Helen is a journalist, editor and copywriter with 15 years' experience writing across print and digital publications. She previously edited the Daily Express website and has won awards as a reporter. Read more here.


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