Britain’s biggest phone companies are set to reveal double-digit price hikes as people endure the worst cost-of-living crisis in a generation.
The UK’s main inflation gage, the Consumer Prices Index, will be announced Wednesday and is forecast to stay at about 10%, close to 40-year highs. If BT Group Plc, CK Hutchison Holdings Ltd’s Three UK and Vodafone Group Plc don’t change their current pricing models, bills for their millions of customers will start increasing by about 14% from April. Inflation figures published in February will determine prices for O2 customers.
Operator | Price mechanic |
---|---|
BT/EE | 3.9% + CPI published January |
Vodafone | 3.9% + CPI published January |
Three UK | 3.9% + “an amount up to” CPI published January |
O2 | 3.9% + RPI published February * |
* Only applies to service fee, not handset |
Although phone bills typically fall relatively low on the list of families’ outgoings — beneath mortgages, rent, taxes, energy or childcare — they’ve come into sharper focus for British politicians and regulators as stubborn inflation squeezes consumers’ wallets.
“While Ofcom doesn’t set retail prices, companies must treat customers fairly – particularly during an exceptional period of hardship for many households,” a spokesman for the telecoms watchdog said by email. Ofcom said customers must be told up front about future price rises before they sign up, and it’s investigating whether that’s happening. It’s also examining “the transparency of inflation-linked price rises in contracts, and how well they’re understood.”
The price hikes won’t apply to all customers, but rather those that joined networks after their most recent policy changes.
“While telecoms bills do remain a very small fraction of total average household spend, and UK customers are getting among the lowest prices in all of Europe, we do recognise that everything adds up,” a spokesman for BT said by email, adding that several of their charges including social tariffs aren’t rising and that money was needed to invest in infrastructure.
The Department for Digital, Culture, Media and Sport declined to comment but in November toldtelecoms executives to “be mindful of the impact price rises have on households struggling with the global rise in the cost of living.”
Newest Utility
The opposition Labour Party, which is regularly leading opinion polls, described broadband as “the newest utility” in November, and called for stronger consumer protections and a mandatory industry-wide low tariff for low-income families.
Meanwhile, investors would like the businesses to pass price increases through, according to a note about BT earlier this month from Berenberg analyst Carl Murdock-Smith.
“While executing its CPI + 3.9% pricing mechanism may risk a longer-term political backlash, we believe that it would initially be taken positively for the share price and lead to 2023-24 consensus upgrades,” he wrote.
In their most recent earnings calls, telecoms CEOs have committed to the hikes, citing rising costs such as energy and labor. Several have also rolled out so-called social tariffs, which let people on state benefits apply for cheaper services. –BLOOMBERG