Stelios sparks mobile price war

Stelios Haji-Ioannou, the low-cost airline magnate, plunged the mobile phone industry into a price war yesterday with the launch of easyMobile.

Stelios Haji-Ioannou, the low-cost airline magnate, plunged the mobile phone industry into a price war yesterday with the launch of easyMobile.

The entrepreneur launched a package of low-call and text prices but his offer was immediately undercut by the Carphone Warehouse chief Charles Dunstone, who is advertising mobile phone calls at half the easyMobile tariff.

The battle pitches two of the country's leading young entrepreneurs against one another in a head to head fight to lure mobile customers with services that focus on selling cheap voice calls and texts rather than handsets.

Stelios's launch provoked reactions from other rivals as well. Virgin Mobile, 70 per cent-owned by Sir Richard Branson, weighed in with fierce criticism of Stelios's new service, while Tesco said it was working on plans to launch an ultra-cheap mobile service under its Value economy brand, known for low-cost retailing including jeans that sell for £4 a pair.

EasyMobile is a partnership between Stelios, the founder of the easyJet airline who has licensed his brand to the new venture, and the Danish telecoms group TDC. EasyMobile will "unlock" mobile phones under contract to rival operators so people can switch to its new service and it is also selling SIM cards to insert in customers' existing mobile phones. Its tariff is 15p a minute for voice calls and 5p a text. For three months it is offering voice calls for 9p a minute and texts for 3p. It retails exclusively over the internet.

However, Mr Dunstone revealed he has slashed prices on Carphone Warehouse's Fresh mobile phone service by half. It is now charging 7.5p a minute and 2.5p for texts. Both easyMobile and Mr Dunstone's Fresh operate using the T-Mobile network.

"It is no coincidence that we have chosen today to launch our new Fresh tariffs," Mr Dunstone said. "But the fact is that the mobile phone business is not an airline business. The price of mobile calling has been falling every year for the 15 years we've been in existence. There is a big market for simple, low-cost, no frills, everyday calls. We've helped create it. We're the price and service leader. We'll stay the price and service leader."

The new tariffs from Fresh will be delivered by double top-ups. When a customer makes a top-up they will receive twice the talk time and twice the number of texts. The allocation will last only 30 days.

Robby Bourlas, the commercial director of easyGroup, said the company had no plans to match Mr Dunstone's tariffs. "We are happy when our competition imitates out strategy,"he said.

Stelios insisted that his tariffs would be attractive and poked fun at a recent attempt by Orange, the mobile operator owned by France Telecom, to stop him using his usual orange livery for easyMobile.

"I am confident that the consumer will be thrilled with the combination of price and service offered by easyMobile. Moreover I think that is why Orange is running so scared that they decided to take us to court over a spurious claim that we cannot use the colour orange. I have been using this colour for 10 years and I will not stop using it now for anyone. Let the battle commence."

The case being brought by Orange is expected to come to the High Court this year.

Virgin Mobile attacked the additional charges easyMobile is making and its policy of allowing users to build up a negative balance on their accounts and then charge them £5 if the account is blocked for going over a £10 overdrawn balance limit. It will charge customers 40p when they credit their accounts and will charge £4 for invoices sent through the post. Virgin also highlighted that easyMobile users will not be able to make or receive calls when abroad as the company has no overseas roaming agreements with foreign networks.

Tesco issued a threat to easyMobile, and other operators, as it extended its Value brand into telecoms. "Whenever Tesco takes Value into a new market we always give the competition a run for their money," a Tesco spokeswoman said.