Orange and Vodafone go it alone with PAYG price hikes

Orange and Vodafone are raising their pay-as-you-go voice and text prices, claiming they have been forced to do so by new Ofcom rules designed to make it cheaper to call mobile phones
Written by David Meyer, Contributor

Orange and Vodafone are raising their pay-as-you-go prices, saying the move is in response to new Ofcom rules that make it cheaper to call mobile phones from landlines.

Vodafone taxi

Vodafone and Orange are raising their pay-as-you-go prices, in what they say is a response to new Ofcom rules. Photo credit: Vodafone

The new rates at Orange, which came into force on Friday, see calls go up from 20p to 25p per minute, and texts from 10p to 12p apiece. Vodafone's hikes, which will take effect from 14 July, will see standard calls increase from 21p to 25p per minute and texts from 10p to 12p.

Rival operators T-Mobile, O2 and Three told ZDNet UK they do not plan to raise their own pay-as-you-go (PAYG, or pre-pay) prices. However, there will be no disparity, as the increases at Orange and Vodafone bring those operators' pricing more or less in line with that of their competitors, rather than taking it higher.

Vodafone explicitly blamed the rises on an Ofcom-mandated cut in mobile termination rates (MTRs). An MTR is the charge an operator levies on another operator to have the second operator's customer connect a call to the first operator's customer.

The cut in MTRs, which came into force in April, was designed to reduce the cost of calls to a mobile phone from any phone. After it took effect, TalkTalk and BT duly offered cheaper landline-to-mobile deals.

However, Vodafone has now carried out the PAYG price rise it threatened when negotiating with Ofcom ahead of the cut.

"This price rise comes after recent regulatory changes," Vodafone said in a statement. "During our discussions with Ofcom over mobile termination rates, we stressed that if the rates came down rapidly and dramatically, the cost of Pay As You Go was likely to rise as a consequence."

T-Mobile, O2 and Three said they have no intention of raising their PAYG prices. T-Mobile's text-centric PAYG plan costs 25p per minute for calls and 10p per text, while its voice-centric plan costs 20p per minute for calls and 12p per text. O2 charges 25p per minute and 12p per text. Three charges 26p per minute and 11p per text.

Ofcom suggested to ZDNet UK that the benefits of cutting MTRs outweighed the rise in Orange and Vodafone's PAYG prices.

"There is a lot of competition in the mobile market and we urge consumers to shop around to get the best deal for them," an Ofcom spokesperson said on Monday.

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