Operators kill subsidised prepaid mobiles

UK mobile phone operators are not going to subsidise prepaid mobile handset sales any longer, meaning cheap deals are about to become a thing of the past.

Over the next three months, prices are set to rise to around £100 for the cheapest prepaid handset on the market.

The move is a result of a change in accounting practices for operators, according to Bernt Ostergaard, telecommunications analyst at Giga Web.

Ostergaard said: "These price rises reflect a general trend for operators who are redefining success as profit margins instead of the number of new subscribers."

Last summer UK operators began debating the value of subsidising prepaid mobile phones due to the market increasing financial pressure to look profitable.

A spokeswoman from BT Cellnet said: "Prepaid customers don't spend a lot on calls and get free phones so operators are often losing money. This is about attracting high-value customers."

In the weeks leading up to Christmas, BT Cellnet hiked the cost of its prepaid handsets up to a whopping £89.99 - a move being followed by every other UK operator.

The price rises are not expected to affect contract customers as they already generate operator revenues through phone call billing.

Ostergaard added: "We won't see the end of the prepaid. There's a professionalisation of the prepaid market making it attractive for some business users."