PayG Phones In for a Price Hike!

The pay as you go or the PayG phones as they are affectionately called here, are arguably the cheapest pre-paid phone service option like Cheap iPad deals that you can have anywhere in the globe. The buyers find the lure of getting both the new smartphone handset of their choice as well as the free connection highly attractive and simply jump at it. So far the going was good as the network service provider here offier the various PayG phones found it feasible enough to subsidise the cost of the handset for the various pay as you go moble phone deals that are on offer. The major reason for the main network service operators going in for a withdrawing of the subsidy from the handsets under PayG phones has been the recent regulation regarding termination charges brought by Ofcom. The recent hike in VAT also is cited by some as the cause for this sudden move. Putting a cap on the termination charges mean the networks can henceforth charge only less from customers on rival networks and landlines connecting to theirs. The regulation requires the network carriers to gradually reduce the cost to 80 per cent of it within the next four years. This, in effect, is expected to cost the industry a good £ 2 billion. Now, if we take the other mobile phone deals like the SIM free mobile phones, there is no subsidy involved on the pricing of handset in any case The subsidy, happens to be biggest cost for the network service providers and hence will have direct bearing on their pricing of the pay as you go phones. This, in plain words, means that the Pay G phone customers suddenly will become loss making segment if the present pricing structure continues.

This is why O2, Everything Everywhere (tie up between Orange and T-Mobile) and more recently Vodafone have decided to withdraw the subsidy they were extending to the PAYG phones. This move will become effective from July, 2011 onwards.

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Raina Kelsey is an author and Telecommunication Industry Blogger.

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