• Millions of people on classic mobile contracts are overpaying for their phones, further adding to the cost-of-living crisis
• Three of the four UK mobile network operators (EE, Vodafone, and Three) are continuing to charge millions of customers for their handsets long after customers have finished paying for them.
• A new study – the largest of its kind – has found that the overwhelming majority (80%) of consumers feel cheated and believe they should be automatically moved to a cheaper tariff once they pay for their handset
• Virgin Media O2 automatically rolls down its direct customers’ contracts once they’ve paid off their devices ensuring they don’t pay more than they should for their phone.

London, UK – A major new study has revealed that millions of Brits are paying for phones they already own because they don’t fully understand their mobile bills.

More than 9 in 10 (93%) Brits are unaware they could be charged for mobile phones they’ve already paid for through their mobile contracts. Less than half of people (48%) are completely clear when their contract ends, yet without this information, millions of customers tied into classic contracts with EE, Three and Vodafone are at risk of overpaying for smartphones they already own.

The practice of combining airtime costs for minutes, texts and data with the cost of the handset can lead to consumers paying more than the value of their smartphone because they receive little discount, if any, at the end of their contract yet continue to be charged the same amount.

The study, which is the largest of its kind, reveals that four in five people (81%) currently out of contract have been so for over three months, with nearly three in ten (28%) taking no action despite their deal ending more than a year ago.

With no clear breakdown of what their monthly mobile bill covers, more than half (55%) of Brits report not knowing exactly how much they pay for their handset each month. According to the consumer charity Citizens Advice, over half (58%) of the average monthly bill is attributed to the cost of the device – meaning that customers are spending tens of millions of pounds each month on mobile phones that they already own when out of contract.

More than four in five (81%) people say they’d feel ripped off if they discovered they’d overpaid for their phone – yet millions of people are unaware this is happening to them.

Virgin Media O2 is the only mobile network operator to discount its combined contract bills for direct customers once they’ve paid for their handset by automatically rolling them onto an airtime only plan, ensuring they never overpay for a phone they already own.

Exacerbating the cost-of-living crisis

This overpayment practice has been happening for years but is being felt more acutely than ever during the cost-of-living crisis with 75% of Brits reporting that they’re looking to save money on their mobile phone bills. Worryingly, this issue is disproportionately impacting those on the lowest incomes, with more than four in ten (44%) respondents who have been out of contract for 12 months or more earning less than £15,000 per year.

The research revealed half of all respondents (50%) said they delay upgrading when their current deal comes to an end believing it will cost them more money, when in fact they should switch to save. A further 2 in 5 (40%) of those surveyed say they’re happy to stick with their current device, but don’t realise they’re continuing to pay for a phone they already own.

Gareth Turpin, Chief Commercial Officer at Virgin Media O2, said: “Bamboozled Brits don’t realise they’re being taken for a ride by opaque, confusing and out-dated mobile contracts. Consumers are being kept in the dark about when they’ve paid for their phone so are spending millions of pounds buying their smartphones twice over.

“With millions of customers from other operators stuck on contracts that force them to overpay for their smartphone, all too often in the mistaken belief it will save them money, we’re sounding the alarm on this smartphone swindle.

“Customers that buy from Virgin Media O2 will never overpay for their phone with bills automatically reduced when they’ve paid for their device – it’s simply the right thing to do.”

O2 was the first operator to introduce split contracts and automatically reduce customers’ bills once their handset loan had been repaid, having first launched its Refresh plans a decade ago. Virgin Mobile launched similar plans in 2014 known as Freestyle. As a result, the vast majority of Virgin Media O2 customers now take split contracts.

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Results are based on an independent online survey conducted by Strand Partners on behalf of Virgin Media O2; n=5303 members of the UK population representative by mobile phone provider, household income, age, gender and UK region.