LONDON (Reuters) - British consumers are spending 530 million pounds ($666 million) a year for smartphones they already own because they are not switching out of bundled contracts once their fixed term ends, research by mobile operator Virgin Media O2 (VMO2) showed on Friday.
Mobile phone contracts typically bundle together a handset, such as an iPhone, with allowances of voice minutes, texts and data for a monthly fee for a period such as 24 months.
But some customers fail to switch contracts after the handset has been paid off, despite being notified by their network.
The operator said its survey showed 93% of customers were unaware they could be charged for handsets they'd paid off, with older and lower-income consumers most impacted.
The company, owned by Telefonica (BME:TEF) and Liberty Global (NASDAQ:LBTYA) LBTYA.O>, called on the industry to follow its lead in introducing more split contracts - which it did more than a decade ago - automatically switching customers to an airtime-only plan at the end of their term, and informing them when they'd paid off their handset.
Rivals BT (LON:BT)'s EE, Vodafone (LON:VOD) and Three said they offered split contracts and provided clear information.
"Like VMO2 we offer split contracts with EE Flexpay, while providing all customers with clear end-of-contract notifications, including the best offer for them based on their usage," a BT Consumer spokesperson said.
Vodafone said customers on split contracts with Vodafone EVO "will not see any further handset charges once their 0% finance deal ends and will therefore never overpay for a phone," adding that it automatically applied a five pound a month discount if customers did not move to a new deal after three months.
A Three spokesperson said the company already offered split contracts where customers can take out a loan to pay for their device, which is separate to their monthly airtime payments.
Regulator Ofcom said in December that 14% of pay-monthly mobile customers with a combined handset and airtime deal were out of contract at the end of Q2, 2022, and it expected the proportion to fall as more people received annual best-tariff notifications.
($1 = 0.7959 pounds)