From the end of April, One2One will charge just 10p a minute for daytime calls and 2p a minute for evening and weekend calls. The tariffs, which apply regardless of whether calls are local or national, mean that at some points of the day using One2One will be cheaper than using a British Telecom fixed-line phone.
Tim Samples, One2One managing director, said the simplicity of the new tariffs would appeal to customers, who often complained that mobile phone prices are too confusing.
He added that the tariffs would also encourage people to give up their fixed-line phones. "We connect 110 million calls a week and have ample opportunity for more," he said. "The average household uses their BT line for 700 minutes a month. I want some of that."
One2One is the smallest of the UK's four mobile phone operators with a 15 per cent share of the market. In recent months the network has lost ground as Cellnet and Vodafone signed up millions of new customers with their popular "pay-as-you-go" services.
Mr Samples said the new rates would also be made available to users of One2One's own pay-as-you-go service, Up2You, who currently pay 40p a minute for calls. However, in order to take advantage of the rates, users will also have to pay a tariff of at least 50p a day.
Mr Samples justified the change by arguing that it was important to encourage customers to use their phones. "This is not just about seeing who can connect the most customers," he said.
Industry analysts yesterday played down suggestions that the mobile phone market was about to be plunged into a price war. "One2One had been losing market share and this allows them to take the initiative," said Justinian Clifford-Bowles, a telecoms analyst at Commerzbank. "But it certainly isn't a revolution."
Other operators were also dismissive, stressing that network quality was just as important to new customers. "One2One has to be careful that people don't end up thinking they are cheap for a reason," said one.
A recent survey by Oftel, the telecoms watchdog, identified One2One as one of the least reliable networks, although the company claims its own surveys put it ahead of its rivals in terms of reliability.
Mr Samples said he expected average revenues per customer to remain stable as users increase usage in response to the tariff cuts. Contract customers now spend pounds 480 a year, while pre-pay customers spend more than pounds 200.
Analysts value the company, expected to report earnings before interest, tax, depreciation and amortisation of pounds 100m this year, at pounds 7bn to pounds 11bn.