Prices of mobile services are falling, Ofcom say

23 July 2021   By Dr Lucy Brown, Editor

New research from Ofcom shows the average basket of SIM-only mobile services was 10% lower in 2020 compared to 2019.

In addition, the premium for taking 5G rather than 4G mobile services has fallen to £3 per month.

They also found customers pay the equivalent of 23% APR for taking a handset and airtime contract rather than taking them separately.

Around 15% of contract customers opted to switch mobile provider in the past 12 months, while 20% of prepay customers did so.

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Prices falling

Ofcom say the price of mobile services is falling for most customers, with those taking SIM-only deals based on average use seeing costs fall by 10% in 2020 compared to the previous year.

It means customers are paying an average of £10.96 per month, down by £1.27 on a year earlier.

They calculate that mobile prices for average users have fallen by 22% since 2015, despite data use increasing by 369% over the same period.

The average monthly household spend on mobile voice and data services in 2020 was just over £38 compared to £50 in 2015.

Lower-use customers

It isn't all good news, however, with customers using their mobile phones the least experiencing price rises of up to 26% compared to 2019.

Ofcom cite O2's removal of traditional pre-pay SIMs and changes to the way Three charge for pre-pay deals as partly to blame for the rise in prices.

While Three are the only major network still offering a traditional pre-pay model, Ofcom pointed out they also announced out of allowance price increases in February 2021, further pushing up costs for pre-pay customers.

In practical terms, this means customers who use their phone for making up to 50 minutes of calls per month are paying £5.22 per month (up 85p from 2019 but down £1.30 since 2015).

Similarly, those who use their phones for 50 minutes of calls and 50 text messages per month are paying £6.17 per month, an increase of £1.28 compared to the previous year.

The divide between those who use their phones to access the internet or apps and those who just want to make calls and texts is penalising low users according to Ofcom's modelling.

Other findings

The annual Pricing Trends Report includes some other interesting statistics, including the fact that the premium for taking 5G services rather than 4G has dropped from £21.20 in 2019 to £3.48 in 2020.

For those in Ofcom's highest data profile (15GB or more), it's actually cheaper to take 5G plans than 4G ones.

Ofcom also estimate the premium for paying monthly for a handset from a mobile company while paying for airtime alongside it is the equivalent of signing up to a loan with an APR of 23%.

It means buying a handset outright is cheaper, yet with the cost of the iPhone 12 starting from £799 at launch, this is not an option for many customers.

Even so, 39% of mobile customers are on SIM-only contracts while 44% are on contracts with handsets.

In terms of switching providers, mobile customers are more likely to do this if they have a pre-pay mobile rather than a contract (20% compared to 15%).

To put this in context, 16% of fixed broadband and landline customers switched in 2020 and 7% of pay TV customers did so.

Read more about the cheapest mobile phone deals and where to get them.

Find the best deal on a new handset

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