Vodafone to adopt pounds and pence price rises

Vodafone has announced they'll be updating all broadband and mobile phone contracts from 2nd July to a pounds and pence based annual price rise method.

Moving away from inflation-linked price rises, Vodafone broadband will go up by £3 per month, while mobile contracts will increase by £1.

The move follows BT and comes as Ofcom are in the process of consulting on banning inflation-linked mid-contract price rises.

Vodafone annual price rises

Vodafone say they are moving away from inflation-linked price rises from 2nd July 2024 for new residential customers of their broadband and mobile services, as well as some small business customers.

Customers who take out a new contract, or re-contract with Vodafone, after 2nd July will see their broadband prices increase by £3 per month each April from April 2025, while mobile customers will see prices rise by £1 per month.

The change is meant to increase transparency and to give customers more clarity over what their annual price rise will be.

Vodafone have also made clear that annual price rises won't be applied to any customers registered as financially vulnerable, nor those on one of their social tariffs, including sub-brand VOXI For Now.

Pounds and pence

Ofcom, the industry regulator, is currently consulting on whether inflation-linked price rises should be banned, for the main reason that customers can't know at the time they take out a contract what the price rise will be, as inflation isn't always easy to predict.

One of the suggested alternatives is moving to a pounds and pence method instead, which is something BT is already using, and now Vodafone will be joining them. While Ofcom have yet to come to a final decision, moves by major providers like this will signal their suggestion is a workable one.

BT's new pricing policy has been set to increase prices by £3 per month for broadband, and £1.50 for mobile contracts, which also applies to EE broadband and mobile, with out of allowance calling costs increasing by 5%.

While these price rise changes are more transparent and easier for customers to understand, they might not necessarily be better value - working out as more expensive now inflation is falling - and they give a slightly false impression of just how straightforward they really are.

While this isn't a new issue with annual price rises, a pounds and pence method still continues the problem that the time of year a contract is taken out changes its total cost, and also working out how many months come before the next April price rise, and how many come after, is slightly laborious when someone may just want to know how much a particular package is going to cost.

Let's take Vodafone broadband as an example and look at how the new pounds and pence price rise policy would apply to their Full Fibre 150 package.

This broadband plan has a 24-month term, and starts at £29 per month.

If a customer takes this package in July 2024, they'll get nine months at £29, then the price will go up by £3 to £32 for the next 12 months until April 2026, when it then increases again by £3 for the remaining 3 months of the minimum term:

• 9 months @ £29 = £261
• 12 months @ £32 = £384
• 3 months @ £35 = £105

That comes to a total cost over the length of the 24-month contract of £750. Yet if a customer took the contract out in say, November 2024, the cost would be £24 more:

• 5 months @ £29 = £145
• 12 months @ £32 = £384
• 7 months @ £35 = £245

So, taking the contract out on November costs a total of £774, £24 more, or an increase of 3.2%.

Of course, this issue still existed with inflation-linked price rises, but the point is, it's still an issue that hasn't been resolved by the pounds and pence method. Customers are also still required to work out the increases before knowing the true cost of what they're signing up for, which might not be straightforward for everyone.

In addition, if providers can say prices need to go up by £X amount each year, then they could simply do these workings for the total cost of the contract and charge customers a straightforward price that didn't change. In the first example, a contract costing £750 over 24 months could simply be charged at £31.25 per month instead.