Understanding The Mobile Price Hikes

April means spring is underway, but for many, clouding that is the realisation that mobile contracts are about to increase. But understanding why they happen, and what to look out for, can help to ease the impact, as SIM-only mobile provider spusu, explains.

In 2023, phone contract prices surged by 17.3 per cent — thought to be the highest inflation rate in 40 years. To some relief, this year’s average prices increases are predicted to sit at around nine per cent. But still, customers need to be aware of what they’re signing up for.

Imminent increases

Every April, telecoms providers are allowed to increase bills in line with the Consumer Prices Index (CPI) from December or the January Retail Prices Index (RPI) rates. Typically, the increases are the CPI or RPI plus 3.9 per cent.

These increases are written into contracts and affect millions of mobile customers. As the practice becomes more widespread, concerns have been raised about the lack of clarity for customers regarding their future payments, as well as the affordability of mobile phone contracts given the current cost of living crisis.
Small print, big change

How many of us would be guilty of not reading the terms and conditions when agreeing to a contract? Well, you’d also be forgiven for thinking the monthly price you agree for your mobile contract doesn’t change.
Like most agreements, when inflation hits, it’s a snowball effect. The more telecoms providers are affected by prices increases, network investments and growing competition, the more they have to increase mobile contracts to compensate. Every provider that increases its prices mid-contract will mention this, but many customers are caught short when they haven’t prepared.

Besides simply catching people out, it appears that there is also a lack of understanding, as a survey from Ofcom revealed that nearly half of customers do not in fact know what the CPI and RPI measure.
Before taking out a new contract, customers should firstly research UK providers and how much each provider can charge on top of the contract price. It will be stated in the terms and conditions so, while not the most exciting read, carefully reviewing this can ensure you know what you’re signing up for now and in the long term.

If customers are unhappy with the prices increases, they can explore switching providers. But cancelling a contract mid-way comes with an early exit fee, and how much this costs is variable depending on the provider. According to Ofcom, the only way to avoid being charged for exiting a mobile contract early is if the price increase qualifies as "material detriment," meaning it significantly exceeds the inflation rate.

Industry expectations

In December 2023, Ofcom proposed banning inflation-linked price increases. It calls for providers to tell customers upfront in pounds and pence, rather than percentage, about any price rises in their contract. Ofcom states that inflation-linked price rise terms “not only make it hard for people to find the best deal, but also make competition less effective.” It also highlighted that it means customers must assume the risk and burden of financial uncertainty, which can impact their ability to manage costs.

While there is no confirmation of if, or when, this ban will happen, what can customers expect in the meantime? Let’s take the UK’s ‘Big Four’ — Vodafone, EE, O2 and Three. O2 customers who took out a deal or upgraded on or from March 25, 2021, will face an increases of around eight per cent, with Three, EE and Vodafone customers facing an increase of just under eight per cent, depending on when the contract was taken out or upgraded to.

At the start of 2024, spusu conducted its own research into the price increases. It found that an average SIM-only mobile contract will increase from £21 to £22.80, whereas a phone-and-SIM mobile contract will increase from £35 to £38.

As a mobile provider that prides itself on being fair, spusu wants customers to feel in control of their costs. As a result, spusu has frozen its prices until the end of January 2026, meaning that for customers of their SIM-only plans, which start at £9.90, they can rest assured the price they agree is the price they’ll pay.

April brings spring, but it also means the price increases have sprung. The increases can be hard to avoid for both the provider and customer, but it’s possible to prevent the increases from clouding your April. By understanding why the increases happen and reviewing the provider’s terms thoroughly, customers can make an informed decision that doesn’t come as a shock.