WIREDGOV

Mobile phone firms are selling customers contracts which cost on average 130 per cent more than they need to, a new report reveals.

Citizens Advice commissioned a mystery shop on the UK’s leading mobile phone providers and found major variations on contracts offered to customers.

Average monthly tariffs recommended by phone staff were £23.16 - more than double the price of the most suitable tariff found by the Citizens Advice research (£9.89).

Mystery shoppers provided the same information to all sales staff and deliberately did not express a preference for the kind of phone. They said they wanted a tariff for any kind of smart phone which met ‘average’ needs, around 250 minutes of calls, 250 texts and 200MB of data per month.

The cost of tariffs offered to customers by staff varied significantly. They range from:

• EE between £10 to £50.82 (difference (£40.82)
• Vodafone £9.99 and £49.99 (difference £40)
• O2 £11.35 to £46.00 (difference £34.65)
• Three £10 to £40 (difference £30)

Some 40 per cent of mystery shoppers were recommended tariffs with 1000 or more inclusive minutes of calls - at least four times more than was needed by the customer.

The report does not find examples of mis-selling, but mystery shoppers said a major problem was a strong sales focus on handsets.

Most networks combine the cost of the handset with the cost of the service into one contract with one monthly payment.

This makes it impossible for consumers to work out how much they pay for the handset and how it is divided over the course of the contract.

It also means consumers are in effect taking out a credit agreement which is hidden in a service contract.

Gillian Guy, Chief Executive of Citizens Advice, said:

“Mobile phone customers are being saddled with unnecessarily expensive contracts.

“While we didn’t find evidence of mis-selling, sales pitches were focussed overwhelmingly on phone brands which meant not enough attention was paid to tariffs - which are very important.

“The focus on handset brands mean people are essentially taking out loans on expensive phones - but without being able to work out the details of the loan or whether it’s value for money.

“Mobile phones have become an essential product for the majority of people and with many contracts now lasting for years it’s crucial more is done to help consumers get the best deal for them.”

The report says some firms already split out the cost of the handset and the tariff - and calls for this approach to be rolled out across the industry.

The report also recommends:

• Price comparison websites and phone retailers should give customers the option to search for deals based on consumption rather than handset preference.
• Ofcom should identify and develop tools to help consumers understand their consumption and find tariffs that fit their needs.
• Phone companies should review incentives offered to staff to ensure they recommend the contract that best meet the customer’s needs.

Chart shows the most expensive, average and least expensive tariffs (£ per month) recommended by sales staff to mystery shoppers, broken down by network.

Notes to editors

1. The above research was carried out on behalf of Citizens Advice by Newlann Ltd. Analysis is based on the findings of 350 mystery shops (fieldwork conducted between 4.8.15 and 30.8.15).
2. Mystery shoppers told sales staff that they were pay as you go customers who were looking to move onto a contract which included the cost of the handset. Shoppers specified that they needed a smartphone, but did not have a preference for a particular brand or model -  they simply wanted a tariff which best met their needs as an ‘average’ user, using approximately 250 minutes, 250 texts and around 200 MB of data per month. The mystery shops were divided up across the three main sales channels - in store (135 shops), over the telephone (175 shops) and via web chat on the network’s website (40 shops). The four major networks (Vodafone, EE, O2 and Three) and Carphone Warehouse were allocated 262 shops in total, with a minimum of 50 shops each. A further 88 mystery shops were allocated to other independent retailers.
3. Researchers also carried out desk based research on the internet, using the network’s websites and price comparison websites, to establish which of the tariffs most closely matched the needs of the consumer in our scenario. This provided a baseline from which to assess whether sales staff were directing the mystery shoppers to the most suitable tariff based on the information they were given about their needs.
4. The Citizens Advice service comprises a network of local Citizens Advice, all of which are independent charities, the Citizens Advice consumer service and national charity Citizens Advice. Together we help people resolve their money, legal and other problems by providing information and advice and by influencing policymakers. For more see the Citizens Advice website.
5. The advice provided by the Citizens Advice service is free, independent, confidential and impartial, and available to everyone regardless of race, gender, disability, sexual orientation, religion, age or nationality.
6. To get advice online or find your local Citizens Advice in England and Wales, visit citizensadvice.org.uk
7. You can get consumer advice from the Citizens Advice consumer service on 03454 04 05 06 or 03454 04 05 05 for Welsh language speakers.
8. Local Citizens Advice in England and Wales advised 2.5 million clients on 6.2 million problems in 2014/15. For full service statistics see our publication Advice trends.
9. Citizens Advice service staff are supported by more than 21,000 trained volunteers, working at over 2,500 service outlets across England and Wales.