A recent study by Citizens Advice suggests that the customers of Britain’s biggest mobile networks, EE, Three and Vodafone, continue to pay for handsets even after the true purchase cost has been paid off.
The impact of the inflated charges means that customers could be up to £38 a month worse off, with many not knowing that they are paying a premium to have a phone they already own. On average, the research identified that customers are being overcharged £22 a month, but those on high-end mobile devices could be overpaying by almost double this figure.
The issue comes as result of users and businesses electing to spread the cost of the handsets/devices over the contract period, to avoid large up-front capital expenditure. With some phones costing up to £1,000 new, the ability to roll the purchase price into the contract is seen as a welcome ‘saving’ but most people are unaware that the device is typically paid off well before the end of the contract period, leaving them paying an inflated price for calls and data.
Normally hidden within terms and conditions, the exact point at which the phone becomes your property, can be as early as 6 months into the contract period. This is because the mobile providers lock their devices to their network and buy in bulk from the manufacturers, meaning that the actual price for the phone is no where near the RRP for an unlocked device. So, they recover their own RRP very early in the contract, leaving calls, data and profit to make up the price for the remainder of the contract period. Having been challenged by Ofcom and Citizens Advice, the response to the idea of splitting out the individual charges onto bills has been lukewarm to say the least. O2 however, has provided this option on its bills since 2013.
As with the energy market, those that do not regularly upgrade or renegotiate their contracts are most vulnerable of overcharging. This is estimated to be almost 40% of the market.