3 is first to announce VAT strategy for tariffs and prepay
Carphone and Orange are also showing the decrease ahead of 1 December
3 has announced it will introduce VAT cuts across all tariffs this weekend, bringing savings to contract and prepay customers ahead of the official 1 December date.
It is the first network to reveal how the tax cut is to affect its contract and pay-as-you-go customers. Orange will also apply discounts early but only on handsets
3 tariffs will still be displayed as normal in-store and online but the 2.5% reduction will be automatically deducted at the point of purchase for the duration of the VAT cut.
Price cuts will be applied automatically to pay monthly customers’ bills and prepay customers will receive a credit as they top up (for example, a £10 top-up will result in £10.18 credit). The savings will be for new and existing customers.
Meanwhile, Carphone Warehouse has already started reflecting the VAT decrease in its stores around the country, though this only concerns hardware. The way the tariffs are affected will be dictated by the networks.
The manner in which the discount will be reflected on contracts with other networks is still unclear. The 2.5% has been criticised for as being too small to offer a meaningful discount on both contract tariffs and prepay handsets.
Orange has announced that it will also reflect the VAT decrease early this weekend but the discount will be on handsets only. Orange’s decrease is on all handsets unless already free with a contract.
Orange’s early move to reflect the VAT decrease is designed to lure customers on what will be the last pay cheque weekend before Christmas.
It is understood that Phones 4u will bring in a similar strategy as of 1 December (when the VAT decrease officially comes into force).
O2 has said it will pass on savings to customers but it is as yet unknown how they plan to do this.
An O2 spokesman told Mobile recently: ‘Where we can’t make the change to our customers immediately, we will make sure they receive any amount due backdated to the time of the rate of change as soon as we can.’
A Carphone staffer said: ‘In these economic times every little counts. Those places that aren’t doing it will not get as many customers. There is a pressure for all the retailers in one form or the other to recognise the decrease.’