O2 cuts 4G prices and lets 3G users upgrade at no extra cost

We see how O2’s 4G price cuts and free upgrade promise stack up against offers from Vodafone, EE, Tesco and Three.

O2 has slashed its 4G tariff prices and pledged to upgrade certain existing 3G customers for free.

The move comes as Three becomes the last of the four major networks to switch on 4G, keeping its promise to provide the service at no extra cost to new and existing customers.

O2 follows EE, which cut prices in October, and Vodafone, which has extended a 4GB data boost offer until 31st January in readiness for the fresh competition.

O2’s price changes

O2’s 4G Simplicity SIM-only plans have been reduced by £5. Deals now start from £21 for 1GB of data, rising to £26 for 5GB and reaching £31 for 8GB of data.

Meanwhile O2’s 4G Refresh pay monthly airtime plans now start from £17 (down from £26) for 1GB of data, rising to £22 for 5GB and at the top end costing £27 for 8GB. But as these are airtime-only deals you will need to factor in the handset price as well, which can be spread out into monthly payments of between £5 and £15.

As well as the price changes to 4G deals, O2 has made a similar upgrade pledge to that on offer from Three.

Existing O2 customers still on a 3G contract can now upgrade to 4G for free, providing they have a 4G-enabled device and their current contract has at least 1GB of data allowance.

For those on an existing 3G contract who don’t have the right handset, O2 is offering 25% off the remaining line rental when they upgrade to a 4G device on an O2 Refresh contract.

And in an attempt to placate those who switched to 4G tariffs when they were more expensive, O2 will boost their monthly data allowances free of charge.

How O2 compares

So what impact has O2’s price changes made?

Below are the cheapest 12-month 4G SIM-only deals on offer from the main four providers, plus Mobile Virtual Network Operator (MVNO) Tesco, which piggybacks off O2’s network.

*6GB if you apply before 31st January. 2GB thereafter.

O2’s changes haven’t pushed it to the top of the table, but it does now beat Vodafone.

Three offers the cheapest SIM-only plan with a monthly cost of just £6.90. However, you only get 500MB of data, which could get used up pretty quickly. But Three offers 1GB of data for £9.90 (with 600 minutes and 5,000 texts) on its Essential Internet SIM 600 plan, which is still cheaper than the rest.

For those after the top level of data for the best price, it looks like Vodafone can help as it is offering 6GB of data for £26 a month if you apply before 31st January. However, Three offers unlimited data on the One Plan for £15 which includes 2,000 minutes and 5,000 texts.

If you want a 4G handset you will need to go for a pay monthly deal.

Below are the cheapest pay monthly tariffs, where a handset comes with no upfront cost, from the main 4G providers plus Tesco.

*6GB if you apply before 31st January.

**Plus up-front cost of £29.99. No EE pay monthly plan is available without an upfront cost for the handset.

Here O2 has made more ground and moved ahead of Vodafone and EE into third slot.

However, Three still offers the cheapest plan with unlimited data for £23 a month, though if you want a better deal on the number of minutes and texts included you will need stump up more cash.

Every provider besides EE has a 4G-ready handset available with no upfront cost on a pay monthly contract. EE’s deal charges you £44.99 a month for 500MB of data plus unlimited texts and minutes, but you will need to pay at least £29.99 upfront for the handset.

Keep on top of your bills with the lovemoney.com budgeting tool MoneyTrack

Driving the cost of 4G down

4G is becoming more affordable.

The cost of the superfast service is being driven down as more providers have entered the market.

EE (a partnership between Orange and T-Mobile) was the first to launch its 4G service back in October 2012. It had a ten-month head start on rivals, which meant it could get away with charging a premium for the speedier connection.

Vodafone and O2 turned on their 4G services in August this year, but prices and data allowances weren't exactly groundbreaking.

The game changer came in the unusual shape of Tesco, which piggybacks off O2’s network. In October it made 4G available for just £2.50 extra. Read more about providers like Tesco in MVNO: cut your mobile phone bill by ditching the big networks.

But it’s Three that is set to really disrupt prices. It became the last of the four major networks to go live at the beginning of December and has stuck to its pledge to offer 4G at no extra cost to new or existing customers, something O2 has tried to mimic at the last minute.

However, coverage remains an issue which could hinder people securing the best deal.

Cheapest 4G provider Three is only available in three cities at the moment, while Vodafone has 15 and O2 has 13 up and running.

EE has 141 cities now switched on.

But all four of the main providers plan to have 98% of the UK covered by 2015.

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