Tesco Mobile Adopt New UK Pricing Policy for Mid-Contract Hikes UPDATE

Mobile provider Tesco Mobile, which is a Mobile Virtual Network Operator (MVNO) on O2’s national platform, has this morning become the latest UK telecoms operator to adopt Ofcom’s new guidance on inflation-linked annual price rises. But they appear to be taking a more proportional approach than many other operators.

The new policy is intended to reflect the regulator’s earlier move to BAN broadband ISPs and mobile operators from doing mid-contract price hikes that are linked to confusing inflation and percentage-based changes (here). BT, Plusnet, EE, TalkTalk, Vodafone, Virgin Media, Three UK and others have already adopted a similar approach, albeit with some variations.

However, Ofcom’s change was never designed to stop mid-contract hikes completely (it’s more about making future pricing clearer and simpler), but it did require providers to tell customers precisely what any future price increases would be when they sign-up (“in pounds and pence“). This rules out changes to core subscription prices that are linked to unknown future inflation values or percentages.

For example, O2 recently chose an approach that will see customers airtime bills increase by £1.80 each April (this tends to penalise users on cheaper plans), while Three UK picked an approach that scaled the mid-contract increase by the size of their data allowances (i.e. +£1 extra for 4GB or less, +£1.25 for 5GB-99GB and +£1.50 for 100GB+).

Tesco Mobile has similarly announced that all of their annual in-contract price increases on non-Clubcard Price deals will be communicated in pounds and pence at the point of sale from 17th December 2024. “These price increases will be relative to each customer’s basic monthly price, so will reflect their personal budget. This proportional model is a fairer way than taking a one-size-fits-all approach, where a customer on the lowest price would see their price increase by the same amount as a customer on the highest price,” said Tesco’s announcement.

Jonathan Taylor, CEO of Tesco Mobile, said:

“We know how important it is to have certainty around your contract price, and our new approach to annual in-contract price increases has been designed to offer maximum fairness.

Every customer who takes out a non-Clubcard Price deal from 17 December 2024 will be shown what their annual in-contract price increases will be and when they’ll apply from, with all costs clearly explained in pounds and pence.

And if you’re a customer on one of our many Clubcard Price deals, you’ll enjoy peace of mind, knowing your basic monthly usage price will stay frozen for the length of your minimum contract period. And you’ll have the added benefit of no EU roaming fees for the length of your minimum contract period, too – so you’ll be able to use your UK allowances at no extra cost in 48 destinations across the EU and beyond.”

In addition, Tesco Mobile said they’re continuing their ongoing commitment to frozen prices for customers on Clubcard Price deals (i.e. cheaper plans if you have a Clubcard). As well as having their basic monthly usage price frozen for the length of their minimum contract period, these customers will be able to use their UK allowances at no extra cost in 48 destinations across the EU and beyond – also for the length of their minimum contract period.

On the surface, Tesco Mobile’s approach sounds much fairer than what many other broadband and mobile operators have adopted. But we can’t yet judge this properly because the operator’s announcement fails to include any practical examples, which would allow us to assess the proportional impact. Similarly, their website has yet to be updated in order to reflect the change.

The announcement currently only indicates that the new policy will apply to new and re-contracting customers who take out a non-Clubcard Price deal from 17th December 2024, although such changes do eventually tend to filter down to existing customers too.

UPDATE 10:42am

Tesco Mobile has kindly provided some examples of how the change will impact customers.

A spokesperson for the operator told ISPreview: “By applying a proportional increase it means that someone on a £14.99 a month deal would see their basic monthly price increase by 90p, whilst someone on a £30 a month deal would see their basic monthly price increase by £1.80, ensuring that those on the lowest tariffs won’t have to pay more than they need“.

One catch with this approach is that it may be difficult to express as a single rule, without defining the “proportion” more generally (this would possibly require a % and Ofcom’s change suggests they might not be able to express it like that). A quick bit of maths shows that both increases represent a percentage rise of 6%.