Pre-pay phone users fleeced, says Orange claims pre-pay phones `fleece' customers, are `fleeced', says Orange

AN EXTRAORDINARY row broke out yesterday between Britain's mobile telephone operators after Orange claimed that millions of customers who bought pre-payment phones were being "fleeced". Hans Snook, chief executive of Orange, also alleged that pre-payment phones were a "con job" and estimated that 30 per cent of those sold were now switched off and lying in drawers after customers had discovered how prohibitively expensive they were to use.

Mr Snook, who is known for his colourful and controversial views on the mobile industry, also criticised supermarkets for selling pre-payment phones for as little as pounds 49.99 without telling their customers how costly they were to run.

The launch of pre-pay phones has led to an explosion in mobile sales in the past 12 months. Pre-pay phone sales rose to 3.1 million in the first half of this year against 677,000 a year ago, and account for a third of the market. They are hugely popular as presents, or for teenagers because parents can control the amount spent.

Vodafone AirTouch, the market leader with 6.2 million subscribers, of whom 2.5 million are pre-pay, hit back at the claims by Mr Snook. "The fact is that Orange missed the boat a little and that is why he is rubbishing pre-pay phones. There is a bit of sour grapes in all this," said a spokesman. "If pre-pay was a rip-off it would not have been as popular as it is. People would not buy them."

One2One also attacked Mr Snook's claims: "We offer a deal whereby customers can pay precisely the same price whether they are on pre-payment or contract." A spokeswoman defended the sale of pre-pay phones through supermarkets, saying many customers preferred to buy that way. One2One said pre-pay customers could use phones for 2p or 10p a minute and Vodafone said its off-peak charges were as low as 5p a minute. But Mr Snook maintained that many pre-pay deals contained hidden charges that customers did notfully appreciate until they had bought the handset. For instance, some operators were charging subscribers up to 50p a day to use their network.

Orange plans to launch a pre-pay package in the autumn which, it claims, will offer better value. Customers will be able to switch from a pre-pay arrangement to a contract, but with a ceiling on their monthly phone bill. The new pre-pay phones will also have more facilities such as the ability to make international calls.

Orange yesterday reported a sharp drop in losses for the first half and said that its UK operation had made a pre-tax profit in the second quarter of pounds 3m - its first bottom line profit. Subscriber numbers stand at 3.14 million and Orange said it was capturing nearly half the growth in more profitable contract customers. Group losses before exceptional credits fell 35 per cent to pounds 32m.

Mr Snook also accused the Government of sanctioning an "expropriation of shareholders' assets" by allowing bidders for third generation mobile licences to roam on the networks of existing operators. A High Court ruling on the Government's action is due any day,following a judicial review of the move brought by One2One.

Outlook, page 17