/ Technology

Are you wasting money on a mobile you already own?

Mobile emojis

It’s always a great feeling to know you’ve paid off a bill. But what if you were still being charged every month for something you’d already paid off? Well that could be happening with your mobile phone contract…

New research for our Unlock Better Mobile Deals campaign shows that we’re collectively wasting a shocking £355m every year by shelling out for handsets we’ve already paid off.

That’s because nearly half of the people in our survey didn’t switch straight away when they came to the end of their contract. On average they’re paying an extra £92 each towards handsets they already own.

Vodafone, EE and Three

So how is this happening? Well, most contracts combine the cost of the tariff and the handset. But it’s not normally split out like that, so people don’t know how much each element costs or when they’ve finished paying for their phone.

O2, Virgin Media, Tesco Mobile and Utility Warehouse have tariffs where the handset and airtime costs are separate, while giffgaff has never bundled the handset in. Whereas Vodafone, EE and Three customers still continue to be charged one bundled price.

For example, a contract with O2 Refresh for an iPhone 6 costs £49 a month for 5GB of data and unlimited minutes and texts. Of this, O2 is clear that the handset part of the bill is £25, meaning that you’ll only pay £24 per month when the contract’s over.

On a similar plan with Vodafone (4GB of data and unlimited minutes and texts) it costs £48.50 a month. However, that price doesn’t change once you come to the end of your contract and you’ve finished paying off the cost of the handset.

Overpaying for your mobile phone

If you don’t switch as soon as your contract has ended it could end up costing you around £22 for every month you go over. That’s what happened to Jeremy:

‘I was nearing the end of a two year contract that included an iPhone, so I rang Vodafone to ask about upgrading to a new handset. I was told an upgrade would be available nearer to the end of the contract – but when the contract finished, Vodafone didn’t tell me or offer an upgrade.

‘Worse, they continued to charge me £45 a month for a phone I had already paid off. I only discovered that I was overpaying when my daughter mentioned that her bill was only £15.’

We think people are being misled and, as a result, are collectively paying millions of pounds each year for a phone they’ve paid off. We’re calling on all providers to separate out the cost of the handset so you don’t continue to pay after the contract comes to an end. You shouldn’t be handing over money for nothing.

Have you ever continued paying the same amount to your mobile provider even though you’d come to the end of your contract?

Comments
Member

Why do people insist on acquiring subsidised phones from the networks instead of buying them outright? I don’t expect Sky or TV Licensing to subsidise my television. I don’t expect my ISP to subsidise my laptop. I don’t expect oil companies to subsidise my car. Why do consumers expect mobile networks to subsidise their handsets?

I would like to see unbundling of the goods and the service to promote competition and transparency. We need an end to the cost of mobile phones being subsidised by monthly charges because this:
– Encourages consumers to acquire handsets they cannot truly afford through an unhealthy “buy now pay later” consumer debt culture with a disguised loan from the mobile network.
– Distorts competition by disguising the true price of the handset and of the service, as opposed to a SIM-free handset and SIM-only service.
– Encourages wasteful acquisition of new handsets because consumers mistakenly believe they are receiving the handset for free or for very little.
– Necessitates long contract durations in order to spread the cost of the handset, which inhibits competition by preventing consumers from switching networks.
– Causes consumers to continue paying the inflated monthly charge even after they have paid off the subsidy of the handset, unless they remember to take action at the end of the minimum contract period.

Subsidised handsets are usually SIM-locked which:
– Inhibits competition by making it more difficult to switch networks.
– Prevents consumers from using local SIM cards abroad, allowing UK networks to impose unreasonably high roaming charges by excluding foreign competition.

Ideally the norm should be that consumers buy their handsets from a third party (e.g. Apple) and obtain a separate SIM-only monthly contract from a network that charges them only for their consumption at reasonable prices, e.g. 1p per megabyte. We need an end to monthly bundles which disguise loans for subsidised handsets.

Member

I very much support separating the purchase of the handset from the cost of the provision of services, for the reasons that you have given.

Having said that, I don’t accept that contracts that include a handset ‘free’ or at a subsidised price are necessarily poor value for money. There are some very large discounts available in the messy world of mobile phones and some manage to find them, even if most people only think they are getting value for money.

I was interested by your comment about wasteful acquisition of new handsets. Does that mean you are going to hold on to your iPhone 6 when Apple launches its new model?

Member

I aim to buy a new iPhone every time Apple releases a new shape, i.e. the 4, 5 and 6, which is approximately every two years. Unfortunately Apple’s release cycle is based on a similar culture in the United States where 24-month contracts are common. My point is that many consumers wait until the end of their minimum contract term and then say “I’m due an upgrade” rather than moving to SIM-only. For the same reason, those consumers won’t buy a new handset outright while they are still within the minimum contract period for the service. They have been conditioned by the mobile networks into acquiring a new handset every 18 or 24 months, regardless of whether that is the appropriate time to acquire it; this is wrong.

Member

From an environmental point of view, buying a new phone whenever Apple or another manufacturer brings out a new model is another way of ‘wasteful acquisition of new handsets’.

Member

It’s not quite the same. When Apple release a new shape of iPhone, it’s nearly always a big jump in technology with significantly superior hardware. This is in contrast to those who acquire a new handset only because they believe they are entitled to one “for free”, not because of any advance in technology, so they just take whatever is available. Some of these people take an iPhone just weeks before Apple launches a new model, when it reduces all the prices by one price point.

Member

Sorry, I had assumed that ‘wasteful acquisition’ referred to environmental responsibility, whereas you are referring to buying products that are obsolescent.

I will carry on with my old shape iPhone (probably a 5S) and maybe look at the iPhone 8.

Member

No, I meant wasteful in many ways, including to the consumer’s pocket. If the consumer acquires a new handset mainly because they believe it is free, rather than because they specifically want that particular new handset, then it is wasteful.

Member
Ro Atkinson says:
16 April 2015

The answer is that people don’t insist upon it. People are misled into believing that they are getting a good deal. I remember an argument I once had with someone who had simply thrown their phone in a drawer because it was too complicated to use. I told her that she ought to sell it if she didn’t want it so as to recoup the cost. She didn’t seem to be able to understand that the phone wasn’t free. In the end I had to give up trying to explain that it was subsidised. It is not the people that demand subsidised phones, it is the companies that can use them to pull in customers.