VMO2 continues offensive over UK smartphone overspend

Virgin Media O2 is once again on the warpath over alleged overcharging of mobile subscribers, launching an online calculator to help people work out their overspend.

The operator is pitching the calculator as a way to help people take action against overpayments. But to put it another way, it serves as a handy customer acquisition tool for a mobile operator that is struggling to keep pace with its rivals. However, it should still be applauded for shining a light on a practice that is quite clearly pretty unfair to consumers.

Virgin Media O2 has repeatedly called out its competitors for their lack of clarity when it comes to mobile contracts. Its particular bugbear is that the price of a mobile device is often wrapped into a contract, meaning the customer pays for it over, say, 24 months, but once that period is up the service provider rarely reduces the price of the plan to take that into account.

Its latest weapon against what it has been referring to as the Smartphone Swindle by its three main rivals – EE, Vodafone and Three – is an online tool to help customers check if they have overpaid for the smartphone that came bundled with their contract.

“Since we first exposed this issue in May, consumers with other operators have spent more than £100 million paying for phones they already own,” said Gareth Turpin, Chief Commercial Officer at Virgin Media O2, referring to a study it carried out earlier this year.

The data showed that handset overpayments cost UK consumers £530 million each year, with those taking premium devices naturally paying the most. It cited consumer charity Citizens Advice as stating that 58% of the average monthly bill is attributed to the cost of the device, which means that “for millions of people who have finished their minimum contract term, over half of their bill is spent paying for phones they already own.”

93% of consumers are unaware that they could be charged for handsets that they have already paid off, it reiterated, having previously been quite vocal about the lack of clarity in operators’ contracts and bills.

“Now, armed with our new easy to use overpayment calculator, we’re putting clear information into consumers hands, helping demystify bundled contracts and exposing just how costly they can be if no action is taken,” said Turpin.

The action VMO2 suggests customers take includes splitting the device and airtime wherever possible, although it has frequently railed against its rivals for failing to provide – or to publicise – this type of split contract. And naturally, it also urges people to consider switching to another provider should they fail to split their contract.

VMO2 is, of course, subtly positioning itself as the new provider of choice for disgruntled customers, firstly by providing the online calculator and secondly by pushing its own split contracts, which it claims clearly separate out the cost of the device from the cost of the airtime. VMO2 also says it is the only UK mobile network operator to automatically roll down its direct combined contract customers onto an airtime only plan, ensuring they never keep paying for a phone they already own.

There’s a lot to like in this VMO2 campaign. But it’s worth noting that the telco needs the positive publicity more than most.

It faces becoming the smallest of the UK MNOs should Vodafone’s planned merger with Three clear all the required regulatory hurdles, and even before the increased competition that transaction would bring, it is already losing customers. VMO2 shed 1,500 postpaid mobile customers in the three months to the end of June, while its overall mobile customer base – excluding a growing IoT business – fell by 180,500 connections to 23.9 million over 12 months.

The telco also does not fare particularly well when it comes to customer service. Its mobile business has the second-longest call waiting time in the industry, according to recent data from Ofcom. And last month the regulator revealed that it has opened an investigation into VMO2’s business practices, after customers complained that the telco is making it difficult for them to switch provider.

Essentially, the operator needs to push its transparent contracts and position itself as a trustworthy – and potentially money-saving – player in the market to maintain its customer base. And with the cost of living crisis impacting on consumers in the UK, something VMO2 itself points out in its release – 75% of consumers are actively looking to save on their mobile bills, it states – then an online overspend calculator might well be a good start.

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