Virgin Media O2 hit out at its UK rivals after research found customers are overpaying for smartphones to the tune of more than £500 million per year, as it launched a campaign demanding changes.

The operator revealed a study it conducted with advisory company Strand Partners found EE, 3 UK and Vodafone UK collectively had customers on traditional phone contracts which bundle airtime costs for minutes, SMS and data with the cost of a handset.

Virgin Media O2 argued the practice led to consumers paying extra for their phone, adding that even at the end of their contracts, customers were often being charged the same amount by their provider.

In total, handset overpayments amounted £530 million each year, Virgin Media O2 stated adding those taking flagship handsets paid the most.

Virgin Media O2 launched Stop the Smartphone Swindle, a campaign lobbying for its rivals to take a series of actions it already claims to offer: introducing split contracts to give consumers greater choice; automatically rolling down costs to an airtime only plan at the end of their minimum term; and inform customers once they had paid off their handsets.

CCO Gareth Turpin added it is “calling time on this half a billion-pound problem”.

Hitting back at Virgin Media O2’s claims, Vodafone stated it was disappointed to see its rival “confusing customers with incorrect information and sensationalist headlines”.

It added it already offers split contracts and consumers are contacted repeatedly when have finished paying-off a handset or their contract ends.

EE and 3 UK also said they already offer split contracts and provided clear information.