Millions of consumers overpaying for mobile phones due to ‘unacceptable’ contracts, Ofcom says

Regulator wants phone providers to be more transparent when signing up customers

Mobile phone users could be overpaying for their handsets, Ofcom has warned (REUTERS)

Ofcom has branded mobile phone providers’ pricing of contracts as “unacceptable”, and said up to 1.5 million consumers are overpaying for their phones.

The communications regulator said its research showed that approximately two thirds of mobile customers on monthly bills are on contracts that ‘bundle’ the cost of their handset along with the cost of airtime.

However, while this works out as good value for money for most people, the watchdog said a “a significant minority”, estimated at around 1.5 million, continue to pay the same price after the end of their minimum contract period, meaning they are still paying instalments for a handset that has already been paid off.

Ofcom said this happens when providers are not transparent about costs when customers sign up for contracts, which is “unacceptable”.

The regulator said it is considering two options to address the problem, the first of which is a requirement for mobile companies to break down the different parts of the mobile package a customer is buying.

Another option would be to require providers to automatically introduce “fairer tariffs” at the end of a minimum contract period.

Lindsey Fussell, Ofcom consumer group director, said: “Mobile customers should get the best possible deal. We’re concerned that people are not told, or cannot tell, exactly what they are paying for.

“So, we are extending our work on behalf of mobile customers to ensure that handset charges are clear and fair – not just when they enter a contract, but also when their minimum period is up.”

Ernest Doku, mobiles expert at uSwitch, said: “Ofcom’s calls for greater transparency from mobile providers are welcome. As the watchdog points out, millions of customers are currently paying more than they need to for their phone contracts, as they’ve already paid off the cost of the handset but are still forking out the same amount each month.

“There are a variety of different deals available to consumers in the market, so making things more transparent across all tariff types is vital, to make it easier to compare handset costs and what really is the best way to get a phone and airtime package.”

However, Mr Doku warned that there are concerns that some providers will use the splitting of the cost of the handset and airtime to advocate the new breed of ‘flexi’ tariffs.

“While these do separate out the cost of the handset and airtime, the benefits can come at a significant premium to customers who can pay as much as £19m a month on airtime alone,” he said.

“In reality, often the cheapest way to own the latest smartphones is to buy one outright, and pair it with one of the really competitive SIM-only deals currently available.”