The company claims that other firms are keeping people on rates that cover the cost of a handset, even after they have finished paying for the phone. Virgin Media O2 says this is leading to customers being “swindled” out of money.

A survey conducted on behalf of Virgin Media O2 found that 3.9% of all UK mobile customers were still on contracts with EE, Vodafone, and Three that had been rolled over beyond their initial time plan. The company claims that each year, customers on those networks are paying £530m for handsets they already own.

Virgin Media O2 introduced split contracts, which automatically reduce when the phone is paid for, a decade ago, and the company says that they now account for more than 95% of its own contracts. However, its rivals have hit back, saying that they also offer such deals.

EE owner BT called Virgin Media O2’s claims “misleading” and said it already offers a contract called Flexpay, which automatically reduces once people have paid for their handset. Vodafone said it was disappointed to see Virgin Media O2 “confusing consumers with incorrect information”. A Three spokesperson said the company already offers split contracts where customers can take out a loan to pay for their device, which is separate to their monthly airtime payments.

While all operators have improved their communication with customers to let them know they are falling out of contract, Virgin Media O2 says it thinks all providers should ensure customers do not keep paying the higher price once they have bought the phone. The company’s claims have prompted a row with other firms including EE and Vodafone, who say that Virgin Media O2’s claims are misleading and confusing.

Mobile customers sign a deal to pay a fixed monthly amount that includes airtime, usage, and a payment towards the cost of the phone itself. Once the initial contract has ended, the customer owns the phone and can switch to a cheaper deal to cover calls, text, and data only. Virgin Media O2’s accusations highlight the importance of checking your contract and switching to a cheaper deal once your phone has been paid off.