UK broadband prices could jump more than 25% if inflation persists

The UK’s biggest mobile and broadband providers are set to raise prices above the soaring rate of inflation early next year as government officials urge them to heed the effect on the cost of living crisis.

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(Bloomberg) – The UK’s biggest mobile and broadband providers are set to raise prices above the soaring rate of inflation early next year as government officials urge them to hold account of the effect on the cost of living crisis.

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Following their most recent earnings, in which 2022 price increases have boosted revenue, executives from BT Group Plc, owner of EE, and Vodafone Group Plc have indicated they will follow through with deals that would add 3 .9% to the consumer price index. Virgin Media O2, jointly owned by Liberty Global Plc and Telefonica SA, raises fees annually by the same 3.9% plus the retail price index, which was two percentage points above the CPI in July .

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That means charges could jump more than 26% in 2023 if Goldman Sachs analysts prove in their Tuesday forecast that the UK’s headline inflation gauge could top 22% if gas prices stay high. According to the latest forecasts from the Bank of England, inflation in the United Kingdom will peak at 13.3% in the fourth quarter.

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In June, telecoms officials were called to meet Culture Secretary Nadine Dorries and pledged to do more to help customers cope with rising costs. Officials are always watching closely.

“We continue to urge broadband and mobile phone companies to carefully consider the impact their annual price increases may have on households struggling with the global rise in the cost of living,” a spokesperson said. word of the Ministry of Digital, Culture, Media and Sports in a press release. statement.

Together with regulator Ofcom, officials are monitoring the number of customers signing up for low-cost ‘social rates’ available to some people on state benefits, priced between £10 and £25 a month.

Social tariffs

An Ofcom spokesman encouraged people to shop around and said millions could cut their bills today by switching to social rates or finding a new deal if they are out of contract. In February, 55,000 households had subscribed to social tariffs, only 1.2% of those eligible, although the number has increased.

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“Although Ofcom does not set retail prices, we are concerned about their impact on households who can least afford them,” he said.

A spokesperson for Virgin Media O2 did not reveal the number of customers taking social tariffs, but said the number had increased by 80% since March, while BT said the number had doubled in the two last quarters. Three UK does not offer a social tariff.

However, most prices are set to rise significantly as carriers say they need to recoup their investments amid rising costs.

“With input prices rising for everyone in the country, unfortunately we have to pass these costs on to our customers,” BT CEO Philip Jansen told reporters after the company’s first quarter results in July. . “We’re going to stay the course on that.”

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Vodafone CEO Nick Read indicated the same kind of approach and this week rolled out a similar model in Spain.

“We’ve built them into customer contracts going forward, so I expect the industry will continue to do that,” he said of the UK price hike. during an earnings call with the media in July. “We don’t realize our cost of capital in the UK, and so we need to improve our financial position, so that’s obviously a contributor.”

A Vodafone spokeswoman said “we know no one wants to see price increases”, but pointed to rising costs, including energy, staff, logistics and network investment, as that people use more data. A BT spokesperson encouraged customers who are eligible for social tariffs to get in touch and switch, adding “we are committed to supporting customers who are worried about their finances and need extra help”.

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Three UK, owned by Hong Kong conglomerate CK Hutchison Holdings Ltd, has a different policy which imposes a flat rate increase of 4.5% each year. In an interview in early August, CFO Darren Purkis stopped short of an ironclad commitment to this model.

When asked if Three UK would change prices in response to inflation, he replied “there are no plans to do so at the moment” but “if we changed anything it would only be for people who joined after that time” – not retroactively apply a change to users who have already joined.

A representative for Virgin Media O2 declined to comment and a spokesperson for Three referred to comments from CFO Purkis.



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