The government is disappointed by the unexpected rise in O2 prices
The government has asked the media regulator to reconsider its rules on phone companies raising their rates mid-decade, after O2 unexpectedly announced it would raise rates by £2.50 a month.
Technology Minister Liz Kendall said the higher-than-expected increase in O2 prices was “disappointing given the current pressures on consumers”.
“I think we need to move forward faster,” she wrote in a letter to the media regulator. “I am keen to see prices under contracts rise again.”
Ofcom said it shared the government’s concern that “customers facing higher prices should be treated fairly by mobile phone providers”.
“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 the right to exit without penalty if they wish,” O2 said in a statement.
Ofcom has been given until November 7 to respond to Ms Kendall’s letter, and said it would respond to her specific questions shortly.
In January, New rules came Which cracked down on phone and broadband providers who increased prices in the middle of the decade without warning.
However, O2 announced last week that it would be Raised their monthly rates by more than they originally promised.
It was able to do this because the increase was not tied to inflation, and it gave customers 30 days to leave without penalty — as long as they continued to pay for their devices.
The company said it had not contravened regulations and that Ofcom rules do not prevent providers from raising prices.
“The price increase of the equivalent of 8p a day is greatly outweighed by the £700 million we invest each year in our mobile network, with UK consumers benefiting from a highly competitive market and some of the lowest prices compared to their international counterparts,” she said.
Kendall said O2 was going against the spirit of the rules in her letter to Ofcom chief executive Dame Melanie Dawes.
It has asked Ofcom to consider whether a 30-day switching period makes it easier for consumers to switch to another provider.
“I would welcome a quick review of how easy it is for customers to change providers,” she said.
“If companies are determined to increase prices, it is our job to make sure customers are able to go elsewhere as easily as possible.”
It also requested an assessment of whether the January rules give consumers enough transparency about price increases during their contracts.
Ofcom rules require businesses to tell customers how much their bills will rise in pounds and pence before the contract starts.
O2 initially said its monthly prices would rise by £1.80 per month in April 2026 for existing customers.
But the company now says it will rise by £2.50 instead.
Ms Kendall said she wanted phone providers to inform all their customers – including those whose contracts started before the new rules – how much their monthly rates would rise.
“We’ve always said fixed should mean fixed,” said Tom McInnis, policy director at the charity Citizens Advice, who added that the current rule “did not go far enough to protect customers.”
“If one company can get away with this, other providers can follow suit,” he said.
“It is time for the regulator to rule out the mid-decade price rise for good.”
Meanwhile, telecoms analyst Paolo Pescatore of PP Foresight said UK network operators are “financially strapped due to shrinking margins”.
“Achieving the right balance between raising much-needed funds and investing in next-generation networks is never easy,” he added.
But he said that while other providers would typically follow suit in announcing similar price increases, “competitors seem unlikely to follow suit, given the consumer backlash and awareness generated so far.”