Money: A mobile is not just for Christmas ...

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The Independent Online
Mobile phones are great Christmas gifts for people you don't like. Buy one for as little as pounds 10, and the recipient pays up to pounds 300 a year in line rental charges before making any calls. The mobile phone networks are starting to recognise that not everyone welcomes a present where they pay for most of it. Instead, most operators now offer a deal with a handset, up to a year's airtime and a limited number of "free" calls for one inclusive price of pounds 100-plus.

The latest packages operate on a "pre-pay" basis. Buy a phone in a high- street store and it comes with some airtime, usually a month, and some call credits. The owner can then buy vouchers for more airtime or calls from outlets including Woolworth and the Post Office, or buy extra minutes by credit card.

Retailers expect the packages to be hot Christmas sellers. Pre-pay phones are popular elsewhere in Europe: over a million Italians use them. The phone companies say pre-pay phones give users more control over their finances: just charge up the phone, put in a PIN number, and use it. Buyers know just what a call costs, and as calls are bought in advance there are no unexpected bills.

It sounds like a breakthrough. Consumer groups criticise the mobile phone sector for complicated contracts and charges. But higher call charges mean pre-pay mobiles can cost much more than an ordinary set on a monthly subscription. One2One's pre-pay service, Up2You, charges 50p a minute, regardless of time of day, for ongoing calls. Picking up voice-mail messages costs 10p a minute. One2One's regular service charges 30p for a peak-time call, 12p off-peak. Listening to voicemail is free.

On Orange's Just Talk service, 60 minutes of calls cost pounds 29.38 including VAT for ongoing calls - just under 49p a minute. Orange's Talk 60 costs 20p a minute peak and 10p a minute off-peak.

The networks say pre-pay calls have to cost more as the charges also cover line rental, and that the deals are still good. But this is not always so. An Orange user on Talk 60 pays exactly the same pounds 29.38 for both a month's line rental and 60 minutes of inclusive calls. Beyond that, the monthly subscriber starts to save significant amounts, because of the lower call charges. Phones for pre-pay services cost more, too.

There are other traps.Call credits on One2One expire after 90 days, even if not used. Unless you buy more credits, the phone is cut off, even for incoming calls. Even if you then buy more credits, to get back on line you may have to pay for reconnection.

On Orange, unused credits can also be wiped off, after 30 days for a block of 15 minutes, 60 days for 60 minutes, and 90 days for 200 minutes. But Orange gives incoming calls for up to six months from the last credit's use.

The networks concede that pre-pay phones won't suit everyone. People who want to control spending, and groups that might not pass a credit check are among the target groups."Pre-pay is for people who don't want to put themselves through a credit check or people who don't know how much they are going to need it," says Sarah Taylor, spokeswoman for Orange.Frequent users, and people with good credit ratings, will find lower costs by shopping around, however.