News 2004
Mobile phones set to become number one household expense
17/03/2004
Virgin Mobile Money Report reveals spending habits, wastage and consumer confusion in UK mobile phone market -
- Estimated £11.4 billion each year spent on mobile phone bills
- 16-24 year olds spend nearly as much on phones as the average household does on heating and lighting their home
- 3.6 billion free minutes wasted annually
- £507 million each year charged for voicemail
- 6.4 million people suspect they would be better off on a different network
- Almost 5 million people admit to not reading their mobile phone bill
- More than half of UK mobile phone owners don’t know how long it takes to switch networks
13.03.04 Mobile phone spending is set to become the number one household expense, according to a new study by Virgin Mobile. The major report, commissioned by the UK’s fastest growing mobile operator, examines consumer spending and usage habits in the UK mobile market.
According to the research, consumers spend an estimated £11.4 billion each year on mobile phone bills1, with 14% of 16-24 year olds admitting to shelling out £50 or more each month on their phone. This cost is almost equivalent to the average UK household expenditure on utilities such as heating and lighting (£600 on phone versus £660) - indicating that the mobile phone is no longer a luxury but more of a necessity for 21st century phone owners2.
Further to this, three quarters of a million people acknowledged spending £100 or more each month3. At £1,200 per year, this is roughly the same cost as the average premium for private health insurance.
Despite the fact that mobile phone spending is at an all time high and that it is likely to continue to grow, mobile phone owners are at an information low when it comes to knowing how their bills are split and knowing the amount that they are charged for mobile services. For instance, the research shows that the industry would net an estimated £507 million per year if every mobile phone user retrieved just one 10p voicemail message a day4, however a quarter of mobile phone owners (25%) don’t even know if they are charged for voicemail retrieval.
Further to this, it is estimated that consumers could be spending approximately £12.5 million each month (£150 million a year) on calling their operator for advice/information, however, again, 32% of phone owners don’t know if they are charged for this service5. Finally, more than one fifth of consumers (21%) confessed to not knowing if they are charged for topping up and 4.9 million phone owners (13%) admitted to not reading their phone bill at all!
This high level of consumer confusion is further demonstrated by the fact that consumers are also wasting money. With an estimated 3.6 billion free minutes not being used annually, and assuming an average call cost of 10p per minute, the report reveals that consumers could be frittering away £360 million each year65.
In addition to free minute wastage, 19.2 million people - 51% of people surveyed – also admitted to using their mobile at any time of the day, even though their tariff includes peak and off peak call times. This means that consumers on these tariffs are paying significantly higher costs for calls made during those peak times.
Regardless of this, 6.4 million people (17%) suspect that they would be better off on a different tariff/network, although 47% of the population have never changed their mobile phone package. Over half (52%) have no idea of the length of time it would take to switch networks and 20% of 16-24 year olds think that it is more difficult to switch mobile phone operators than power suppliers, credit card companies, fixed line telecoms companies or ISP’s.
Sir Richard Branson, chairman of Virgin Mobile, said: “With mobile spending at an all time high, it is essential consumers make sure they are getting the best possible deal. However, our research shows that consumers are still confused about mobile tariffs and hidden costs in the industry and are unaware of how they are being charged or of the options available to them. We believe that Virgin Mobile's proposition is simple, honest, good value for money and is easy for consumers to understand. This industry has, for too long, relied on a lack of customer education to make money. We are calling for more transparent pricing and more customer information, in order to give UK mobile consumers the best chance of making a good value informed decision.”
Since launch, Virgin Mobile has introduced a number of key initiatives designed to give customers the most choice, including being the first operator to scrap peak rate calls and to allow customers to pay anyway they like. Additionally, voicemail retrieval and topping up are free and the company won the coveted awards of Best Pre-Pay Package and Best Customer Service at the 2003 Mobile Choice Consumer Awards.
