Government disappointed by unexpected O2 price rise

The government has asked the media regulator to reconsider its rules on phone companies increasing prices mid-contract after O2 unexpectedly announced it would increase prices by £2.50 a month.

Technology Minister Liz Kendall said O2’s higher-than-expected price rise was “disappointing given the current pressures on consumers”.

“I believe we need to go further, faster. I am keen that we look again at in-contract price increases,” he wrote in a letter to the media regulator.

Ofcom said it shared the government’s concern that “customers facing price increases should be treated fairly by mobile providers”.

O2 said in a statement: “We appreciate that price changes are never welcome, but we have been completely transparent with our customers about this change, writing to them directly and providing them with the right to opt out penalty-free if they wish.”

Ofcom was given until 7 November to respond to Ms Kendall’s letter and stated that her specific questions would be answered shortly.

In January, new rules have arrived It has taken action against phone and broadband providers increasing prices in the middle of a contract without warning.

But last week O2 announced it would happen It increases its monthly prices more than originally promised.

It was able to do this because the increase was not linked to inflation and gave customers 30 days to opt out penalty-free as long as they continued to pay the cost of their devices.

The company said it was not in breach of regulation and that Ofcom’s rules did not prevent providers from increasing prices.

“A price increase equivalent to 8p a day is vastly outweighed by the £700 million we invest in our mobile network each year, with UK consumers benefiting from a highly competitive market and some of the lowest prices compared to their international counterparts,” he said.

In a letter to Ofcom chief executive Dame Melanie Dawes, Ms Kendall said O2 had gone “against the spirit” of the rules.

It asked Ofcom to investigate whether the 30-day transition period makes it easy enough for consumers to switch to another provider.

“I would welcome a quick review of how easy it is for customers to switch providers,” he said.

“If companies are determined to raise prices, it’s our responsibility to make sure customers can go elsewhere as easily as possible.”

It also called for an assessment of whether the January rules provide consumers with enough transparency about price increases during their contracts.

Ofcom’s rules require companies to tell customers how much their bill will increase in pounds and pence before their contract starts.

O2 initially said its monthly prices for existing customers would increase by £1.80 a month from April 2026.

But the firm now says it will raise it by £2.50 instead.

Ms Kendall said she wanted phone providers to tell all their customers how much their monthly prices would increase, including customers whose contracts started before the new rules.

“We’ve always said fixed means fixed,” said Tom MacInnes, policy director at the charity Citizens Advice, adding that the current rule “does not go far enough to protect customers”.

“If one company can get away with this, other providers can do the same,” he said.

“It is time for the regulator to eliminate mid-contract price increases altogether.”

Meanwhile, telecoms analyst Paolo Pescatore of PP Foresight said UK network operators were “strapped for cash as profit margins are squeezed”.

He added: “Striking the right balance between raising much-needed funds and investing in next-generation networks is never easy.”

But he said other providers often follow by announcing similar price increases, but “given the consumer response and awareness that has occurred so far, it seems unlikely that competitors will follow suit.”