A steep rise in mobile phone bills in the next couple of months is set to worsen when network providers hike their prices for existing customers.
Virgin Mobile and O2 customers will see their bills rise by 11.7%, while other network providers such as EE, Vodafone, Three, Plusnet, iD Mobile and BT Mobile are also expected to raise their prices.
An O2 spokesperson said: “We recognise price changes are never welcome, and always balance keeping our prices competitive with the need to continue investing in the services.”
Why are mobile firms raising their prices?
Most network providers reserve the right to increase their prices mid-contract and hike prices once a year, usually in March or April.
They work out the size of the increase by adding an amount between 3.9% and 4.5%, plus the rate of inflation in January, to your bill. For the inflation figure, they either use the Consumer Price Index (CPI), which was 5.5% in January, or the Retail Price Index (RPI), which was 7.8%
CPI measures the average rise in costs for consumer goods and services such as food and transport. RPI includes costs not tracked by CPI, such as the TV Licence and mortgage interest payments.
How are firms increasing their prices?
The rate of increase for each network provider will depend on which index they choose and the percentage they add on top:
- BT, EE, Plusnet and Vodafone increase their prices by CPI plus 3.9%
- Virgin Mobile and O2 base their new prices on RPI plus 3.9%
- Three will increase its prices by a fixed annual rate of 4.5% for new and upgrading customers. For customers who joined before October 2020 prices will increase by the RPI (7.8%)
Tesco Mobile is the only network provider which doesn’t annually raise its prices.
Sky doesn’t make scheduled annual increases either. However, it reserves the right to hike its costs. Customers can cancel their Sky contract without penalty if they want to avoid paying more.
How to get a better mobile network deal
Customers on a rolling, one-month contract can end their agreement soon after the increase, at the end of April.
Other customers may need to pay a penalty to leave their contract early. This will be stated in the small print.
You can compare deals using an online mobile phones comparison tool such as ES Money’s.
