Pre-pay mobile prices set to soar

UK mobile phone operators are reportedly ending the subsidising of mobile phones, pushing up prices to around £100 for the cheapest pre-pay packages.

Operators have traditionally discounted the cost of handsets to attract new customers to their networks, gaining the money back through line rental and call charges. But they no longer see the need to do so, such is the level of penetration into the market.

The sector has become so commoditised that there is little value in continuing subsidies to attract new entrants, according to a spokeswoman for BT Cellnet.

The operator recently increased its pre-pay price to £89.99 and plans to raise it again to £99.99 in the next couple of months.

"It's something all the networks are doing," the spokeswoman told vnunet.com. "Our plan is to attract and retain higher value customers. Pre-paid customers are not high users of their handsets."

Vodafone admitted in a statement that it had changed its price structure. "High street prices could be in the region of £100 for entry level products," it said.

But the telco claimed it was still subsidising the cost of handsets. "The heavy subsidies offered in the past have created a widespread underestimation of real handset value. Even at this slightly increased price, customers still have access to some of the latest mobile telephone technologies at subsidised levels," the statement said.

Orange explained that its pre-pay handsets were still available at £69.99 and that it had not yet decided to increase prices. But a spokeswoman conceded that the firm's focus was "much less on adding new customers".

"It's about how you decide to use your resources. Is it the best use of resources to try and attract new customers, which of course is what that subsidy does, or do you look to use your resources to provide good service and network performance," she said.

Having fallen throughout 2000 to just £29.99, a subsidy of more than £70, prices for pre-pay phones began to rise sharply last spring.

While as recently as March 2001, pre-pay packages were still on offer in high street stores for £39.99, a series of rises saw prices settle at £69.99 for much of the year as operators sought to make contract deals more attractive.