VAT Pushes Household Mobile Bills To £1,040 A Year But Networks Hike Prices Further

While many retailers are softening the blow of the 2.5% VAT increase for consumers by reducing or freezing their prices, mobile networks are seizing the moment to restructure their pricing and hike prices by as much as 150%. The rises will deal a bitter blow to the five million customers already unhappy with the value for money they receive from their mobile.

* VAT impact: With three phones in every home, VAT rise alone will add £22 a year to average household pay-monthly bill
* Further hikes: Three increases pay-monthly calls and texts by 150% for new customers and removes free voicemail while O2 pre-pay texts jump 20%
* Unhappy: Five million consumers (10%) are not happy with the value for money of their mobile phone deal
* Consumers save an average of £81 a year by switching mobile network.

Mobile customers have not only been hit by last week’s VAT rise, but they must now also look out for further price increases, warns independent price comparison and switching service, Beneath the mask of the VAT increase, mobile networks have uncovered a series of price changes that could leave consumers out of pocket if they have not read and understood their new pricing notifications.

The VAT increase will add £22 a year to the average household pay-monthly bill, taking the annual total to almost £1,040 or £87 a month[3]. But while many consumers may assume that they will see a straightforward 2.5% increase on their bills, the mobile networks have taken the opportunity to introduce a series of price changes, ranging from more expensive calls and texts to the removal of free voicemail and increased billing fees.

New customers signing up to a Three pay monthly tariff will need to keep a close eye on their usage. The network has raised the cost of calls from 12p to 30p per minute and the cost of texts from 12p to 30p per text for new customers going outside of their allowance – an 150% increase. All Three customers not on the ‘all-you-can eat’ One Plan will also now be charged for voicemail, and those opting for paper bills will be charged £1.50 a month, up from £1 a month.

O2 has also re-jigged its pricing. While pay monthly customers have seen calls and texts rise in line with VAT, O2 pre-pay customers have witnessed a 20% rise in the cost of text messages, from 10p to 12p per text. And Vodafone’s roaming customers should beware: making calls within Europe now costs 39p from 38p, receiving them costs 15p from 14p and texting costs 11p, up from 10p.

The good news is that Orange has attempted to swallow some of the additional costs on behalf of its customers, freezing prepay and mobile broadband prices whilst passing the VAT increase onto pay monthly tariffs. T-Mobile, on the other hand, has raised the cost of prepay texts by a penny while increasing the contract costs to reflect the new 20% rate.

Ernest Doku, communications expert at, comments: “These increases will be a bitter pill to swallow for the many consumers trying to stay afloat amid the VAT hike. The cost of a text going up by two pence may not sound like much, but the cumulative effect on a monthly bill can be substantial.

“The good news is that consumers could offset these price rises by reviewing their mobile usage and moving to a better deal. Switching network can save shoppers as much as up £81 a year – without losing your existing number. Plus, it’s a great opportunity to get an upgrade to one of the latest smartphones.”

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