UK mobile network says AI is making phone contract fraud harder to catch
Key Points
- Tesco Mobile lists credit and fraud as an increasing principal risk in its 2025 annual report
- The directors said AI advances are making fraudulent activity harder to detect
- Write-offs for customers not paying rose 40% to £43.1 million
- Premium handsets on 36-month instalment plans are driving the fraud risk
- The FCA is reviewing how mobile providers manage loan-based phone financing
Tesco Mobile has told shareholders that AI is making it harder to spot people taking out phone contracts they never intend to pay for, according to its annual report filed at Companies House.
The operator, owned jointly by Tesco and Virgin Media O2, filed the report for the year to 31 December 2025 on 26 August 2026. It lists credit and fraud as one of six principal risks to the business and marks the threat as increasing.
“Fraudulent activity becoming more complex and harder to detect, especially with AI advances,” the directors said in their assessment of the risk. They also warned that the growing share of premium handsets in sales is inviting more fraud.
The report describes two types of offender: applicants who obtain phones and services they do not intend to pay for, and third parties who obtain them fraudulently. Both, it said, may lead to significant financial loss.
Tesco Mobile’s write-offs for customers not paying rose 40% to £43.1 million during the year. The money it holds back for expected future losses grew from £76.4 million to £118.6 million.
The operator sells phones on instalment plans of up to 36 months, and is now owed £446.8 million on handsets already in customers’ hands. Revenue from postpay handsets rose 17.4% to £530.7 million in 2025 as customers moved towards more expensive devices.
Tesco Mobile said it has an expert credit risk and fraud team that monitors orders daily to prevent losses and has introduced process changes to add friction for fraudsters.
The team also assesses the affordability of every customer across all retail channels.
AI appears a second time in the report’s risk register, under cyber security. The directors said AI-driven cyber threats and automation are increasing the sophistication and frequency of attacks, and that regulatory scrutiny is tightening.
Tesco Mobile runs a dedicated cyber security squad and puts staff through phishing simulations. The company said a successful breach could expose confidential customer information and lead to regulatory fines.
The operator also flagged eSIMs and digital-first rivals as lowering the barriers for customers to switch networks. It said 5G is no longer a clear point of difference between operators.
Regulators are already looking at the wider problem. The report said the Financial Conduct Authority’s Telecoms Market Review is assessing how mobile providers manage credit-related responsibilities amid the rise of loan-based device financing, and Tesco Mobile is engaging with Ofcom on telecoms security.
Tesco Mobile ended 2025 with 5.9 million customers and revenue of £1.23 billion, up 11% on the previous year.
