Three and Vodafone to Impose Inflation-Busting Price Hikes

Subscribers to mobile plans from Three and Vodafone will see their monthly pills rise beyond the rate of inflation from the spring, according to new plans from the networks.

In recent years, Three has raised bills each May by an amount determined by the January Retail Price Index (RPI), a measure of inflation, that year. 

They’ve abandoned that scheme for 2021, announcing that instead all customers who sign a contract after 29 October will see their bills rise by a flat 4.5% each April, starting next year.

For example, a customer who just signed a £20-a-month contract with Three will see their bills rise by 90p, to £20.90, from April 2021.

The price hike won’t impact existing customers until they enter a new contract or upgrade with Three.

The mobile operator said it was changing its price hike policy to increase “certainty and transparency.”

A spokesperson said: “With a fixed price change compared to the variable and unpredictable increases applied by other MNOs [mobile network operators], customers will not have to rely on a fluctuating RPI or CPI rate to clearly understand the full cost of their contract.”

The spokesperson said Three is raising prices to facilitate further investment in its network, including more than £2 billion in “the UK’s fastest 5G network.”

Meanwhile, Vodafone said that new and upgrading customers who sign new contracts from 9 December will see similarly steep price hikes. Starting in April 2021, their bills will rise by the Consumer Price Index (CPI) from January plus 3.9%.

The network previously used January’s RPI to determine springtime price hikes and that will continue to apply to existing customers until they enter a new contract or upgrade onto the new terms.

The CPI is another measure of inflation with a different methodology and is typically lower than the RPI. For instance, the CPI in September 2020 was 0.7%, while the RPI hit 1.1%.

Like Three, Vodafone said the price hikes would fund new investment. A spokesperson said: “We recognise no one wants to see price rises, but these are necessary for us to continue investing in our networks, products and services. This year, our annual price rise will change to the CPI rate plus 3.9%, for new and upgrading customers from 9 December.”

Three and Vodafone have joined BT, and its subsidiaries EE and Plusnet, in shredding older models of hiking bills for higher annual increases. As announced in October, subscribers to BT’s telecoms services will see their monthly bills rise by the January CPI plus 3.9% each March.

Why are telecoms providers imposing harsher price hikes on consumers? A recent blog post from Vodafone Chief Technology Officer (CTO) Scott Petty points to the high cost of constructing 5G networks, particularly with the government’s sudden banning of Huawei kit forcing operators to replace some already built infrastructure.

Consumers’ appetite for data has also grown as HD video streaming and calling becomes the norm, particularly during the lockdown doldrums. SIM-only provider SMARTY found that our appetite for data grew by 11GB a month, on average, during the springtime lockdown. Networks are shouldering higher costs to handle the traffic.

Additionally, new regulation, including the required participation in the Shared Rural Network (SRN) and the recent Ofcom ban on selling locked handsets, also incurs costs or cuts off revenue streams.

Becoming more environmentally friendly also costs mobile operators, with many costs passed onto consumers. In July, Vodafone announced that it will power its mobile network in Europe entirely with renewable electricity no later than July 2021. BT delivered on a previous commitment to green electricity just this week, announcing that all its networks, offices and shops worldwide are now run on 100% renewable power.