Three has backtracked on a promise it made to customers last year not to hike prices mid-contract.

The mobile provider has confirmed that anyone who signs up for a new handset or mobile broadband from 29 May 2015, will have a new contract, which details that it can increase prices annually in line with February's RPI (the retail prices index rate of inflation).

The move comes after rules from communications regulator Ofcom came into force in January 2014, which enable consumers taking out mobile, landline or broadband contracts to cancel penalty free if their provider hikes prices midway through the minimum term and crucially they weren't told their provider could do so at the point of sale.

Just a day after the new rules came into force, Three welcomed them and promised not to raise prices during the minimum contract term. See's Cheap Mobiles guide to find the best deals and to cut your costs.

In a statement released at the time, Three said: "Your fixed monthly recurring fee from Three will not go up in the minimum term of your contract. We support Ofcom's approach to fixing the price for pay monthly contracts for their duration. We think it's only fair that customers should have clarity around costs when they sign up to a contract."

Am I affected by Three's contract change?

Three's new terms mean that anyone who signs up from 29 May 2015 will have a clause in their contract, which says it can increase prices annually in line with February's RPI.

The provider says the first price rise will take effect from May 2016, and will be every May thereafter.

If you signed up to Three before 29 May 2015, there's no change to your contract – you will not face price hikes during your minimum contract term.

I signed up on or after 29 May, can I leave penalty free?

As outlined above, under Ofcom rules you can escape your contract penalty-free if a provider ups prices mid-term without warning you it would do so before you signed up.

However as Three has warned customers signing up or upgrading on or after 29 May that it'll increase prices by the RPI, you won't be able to leave your contract penalty free for this reason.

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Three has backtracked on a promise it made to customers not to hike prices mid-contract

'We know mid-contract price increases are frustrating'

A Three spokesperson says: "We know mid-contract price increases are frustrating but as they are still common practice and we operate in one of the most competitive mobile markets in the world, we have reviewed our approach.

"In the present market, we feel re-introducing mid-contract price increases for new contracts signed on or after 29 May is the best way of maintaining investment in our award winning network and of offering benefits which customers really value, like 4G and roaming at no extra cost in 18 countries.

"We will ensure everyone who enters in to a contract with us understands fully how and when the cost of their contract will change."