Vodafone hope to win EE and O2 customers with price hike ban

16 May 2014   By Jemma Crutchlow-Porter

VODAFONE are aiming to get one up on rival operators EE and O2 by announcing a guaranteed price promise amid controversy over mid-contract price hikes.

vodafone store front
Credit: kailim/Shutterstock.com

In a blog post last week, the company trumpeted their "no surprises" approach and criticised rivals who will increase prices in line with inflation.

But while Vodafone say they've made the move in order to please customers they're really only following the latest Ofcom guidance - and even then are four months late in doing so. Three embraced the new guidelines back in January.

Are Vodafone and Three customers really better off than those with networks increasing prices in line with inflation?

Fixed price promise

Vodafone's fixed price promise ensures that their pay monthly customers only ever pay the price advertised for their minutes, texts and data bundle.

This applies to customers on one, 12 or 25 month contracts.

From now on, the network confirms, if a customer signs into 500 minutes, 500 texts and 500Mb data for £19.99 a month for 24 months, that's exactly what they will pay.

After all, as they say: a deal's a deal.

However, the promise does only relate to the cost of the allowance, so don't be surprised if Vodafone starts upping the price of calls to premium rate numbers, non-geographic numbers, or any other calls, texts and data outside of the allowance.

Having said that, Vodafone has at least got the decency to inform customers should it make any changes to these prices.

Baiting EE and O2

The network suggests that it has introduced the mid-contract price hike ban as a result of feedback from its customers, they polled 1,000 subscribers back in April.

But the announcement couldn't have come at a better time. EE customers that signed into a contract before 23rd January 2014 are due to get a 2.7% increase in the next couple of weeks.

O2 increased their prices by 2.7% in March this year. The network also has plans to hike their prices in line with inflation in April 2015, and every 12 months thereafter.

Unlike sneaky O2, EE has provided customers on new contracts with a different set of terms and conditions but customers on both networks are irritated.

Perhaps Vodafone's decision to delay their own ban on price hikes was actually in the hope that EE and O2 customers will jump ship, rather than a real commitment to their existing customers.

Given that Vodafone have made such a song and dance about their decision to ban mid-contract price hikes in order to win EE and O2 customers, however, it's interesting to note that, even with these price hikes, many would be better off with those networks.

For example, here are prices based on getting an iPhone 5s on 24 month contract.

Data/minutes/texts Network Monthly cost post hikes
2Gb/unlimited/unlimited Vodafone £47.00
2Gb/unlimited/unlimited EE £41.07 (+ £39.99 upfront)
2Gb/unlimited/unlimited O2 £43.00

This is just a quick comparison of pay monthly tariffs but it shows that, despite banning price hikes, Vodafone customers would still be better off on EE or O2, albeit not by much.

Following the rules

It came to the attention of telecoms watchdog, Ofcom, that mobile providers were advertising fixed term contracts at one price, then increasing it before the contract had ended, last October.

As a result, the regulator introduced new legislation that would allow customers to ditch and switch providers without penalty if they are subject to a mid-contract price hike.

However, the new rules only apply to contracts taken out after 22nd January 2014, when the rules were implemented.

This left millions of customers at risk of price hikes stuck in two year contracts unless they were willing to pay the cancellation fee.

These unlucky people are still only able to be released from their contract should the changes to the their terms are of "material detriment".

While there is no clear definition, many networks have successfully argued that price increases in line with the Retail Price Index (RPI) didn't constitute material detriment and have raised prices over the past few years without giving consumers any chance to switch.

Under the new guidance, EE and O2 successfully argued the same point to Ofcom, though their increases must now be clearly set out in their mobile contracts, be no larger than a percentage based on the rate of inflation and happen no more than annually.

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