Tesco announces major price change for customers from next week

Tesco has unveiled significant changes to how it handles mid-contract price hikes for its mobile phone customers. The retail giant's mobile arm, which boasts a customer base of five million, is aligning with Ofcom's fresh guidelines on inflation-linked annual price increases.

Tesco Mobile has pledged that for contracts initiated on non-Clubcard Price deals from December 17, the price rises will be clearly defined in "pounds and pence" for the following year.

In the past, broadband and mobile firms were permitted to up their prices mid-contract by an amount tied to inflation, with an additional leeway of up to 3.9%. Typically, they would use the Consumer Prices Index (CPI) inflation figures from December or the Retail Prices Index (RPI) from January to determine their price adjustments.

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However, under new regulations set by the watchdog to come into force for new contracts starting from January 17, 2025, telecom companies must specify any mid-contract price increases in "pounds and pence."

Other telecom giants such as BT, Plusnet, EE, TalkTalk, Vodafone, Virgin Media, Three UK, and more have already embraced this new policy, reports the Mirror.

Yet, Tesco's approach differs slightly as the increases won't be a fixed sum. For instance, BT group customers are looking at a £1.50 monthly increase from March 2025.

Tesco has announced that its price hikes will be "relative to each customer's basic monthly price so will reflect their personal budget."

The supermarket giant clarified: "This proportional model is a fairer way than taking a one-size-fits-all approach, where a customer on the lowest price would see their price increase by the same amount as a customer on the highest price."

Under this model, customers on a more affordable £14.99 a month plan will face an annual hike of 90p a month, whereas those on a £30 contract will see a £1.80 monthly increase, equating to a 6% annual rise for all plans.

Moreover, Tesco Mobile has reaffirmed their "ongoing commitment" to keeping prices frozen for Clubcard Price deal subscribers, offering them more economical plans when they have a Clubcard. These customers not only benefit from a fixed basic monthly usage price throughout their minimum contract term but also enjoy the perk of using their UK allowances at no extra cost in 48 destinations within the EU and beyond, again for the duration of their contract.

Jonathan Taylor, CEO of Tesco Mobile, commented: "We know how important it is to have certainty around your contract price, and our new approach to annual in-contract price increases has been designed to offer maximum fairness. Every customer who takes out a non-Clubcard Price deal from 17 December 2024 will be shown what their annual in-contract price increases will be and when they'll apply from, with all costs clearly explained in pounds and pence."

"And if you're a customer on one of our many Clubcard Price deals, you'll enjoy peace of mind, knowing your basic monthly usage price will stay frozen for the length of your minimum contract period. And you'll have the added benefit of no EU roaming fees for the length of your minimum contract period, too – so you'll be able to use your UK allowances at no extra cost in 48 destinations across the EU and beyond."

Ernest Doku, a mobiles expert at Uswitch, observed that the new proportional pricing model stands in "contrast" to the flat-rate hikes introduced by other providers. They detailed: "In practice, this means customers on lower priced mobile tariffs will see the lowest increases, while those who pay for a more expensive mobile deal will naturally pay proportionately more. Tesco Mobile's price rises will only apply to customers not on a 'Clubcard Price' deal."

"This new approach means that those on the lowest tariffs won't be subject to disproportionately higher price rises, which could be a better option for customers choosing cheaper plans. However, 6% is still a material increase for consumers."

"The percentage increase could also change every year once you're out of contract, so Tesco Mobile customers should remain vigilant and shop around when they reach the end of their contract to ensure they get the best deal. We've seen mobile providers take a selection of approaches when it comes to adopting a 'pounds and pence' model to mid-contract price rises, making it more important than ever for customers to compare options to find what's right for them."