Price war looms as mobile phone tariffs cut

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A mobile phone price war will start in the New Year as Vodafone, the United Kingdom's market leader, prepares to launch new cut-price tariffs, including per-second billing and free air-time.

The move is widely seen as a reaction to the success of Orange, which has tripled the number of its users in a year, and it is likely that Cellnet, Vodafone's biggest competitor, will follow suit.

The main beneficiary will be the customer, who can look forward to cheaper bills, according both to consumer groups and the networks themselves.

Last week, Vodafone met its service providers, who sell the phones directly to the public, to tell them of the four new tariffs on its digital service which they plan to begin next year. These would incorporate per-second billing and free air-time.

The tariffs would come into force in April, but Vodafone will support any service providers who want to bring it in as early as 1 January. Its 2 million analogue phone users will not be eligible at the moment.

Until now, Vodafone has charged customers for a minimum of a minute for every call and 30-second units after that. It also levies a standing charge that does not include any air-time. The new tariffs are expected to knock between 10 and 15 per cent off Vodafone bills.

Vodafone at present has about 2.25 million users closely followed by Cellnet at 2.2 million. Mercury One-2-One has about 380,000 and Orange 350,000. A spokesman for Vodafone confirmed that it was thinking of four new tariffs but refused to say whether it would incorporate per-second billing and air-time. He said the new tariffs would not replace the old ones but would exist alongside.

Cellnet, Vodafone's nearest competitor, is likely to follow suit. A spokesman for Cellnet said it was "actively considering" the idea, but no decision was likely before Christmas.

Mercury changed to per- second billing in September: "We have no problems with it, it's good news for customers," said a Mercury spokesman. "They are going to save money."

Linda Lennard, senior policy officer at the National Consumer Council, agreed. "We welcome anything that makes mobile phone charges more transparent." she said.

Lisa Gernon, group director of marketing for Orange, said it was "not surprising" that Vodafone was considering per-second billing. She said: "These tariffs show that they are taking us seriously. We predicted that this would happen within a year of our launch. It's taken longer but we're not surprised. I believe we offer a very sensible package which is better value for money."

She added that only Vodafone's digital customers would benefit. "It's not been recognised . . . that they're not offering anything to the 2 million analogue users."

Orange is also planning to get involved in overseas work. It is at present in talks with E-Plus, the German mobile phone network, hoping to come to an agreement which would allow Orange phones to operate in Germany.

The price war this Christmas has been sober in comparison to last year, which was a record year. An estimated 450,000 phone users were connected last December alone. Mercury, Cellnet and Vodafone have decided on offering pounds 50 back if people sign up in November and December rather than going for more elaborate gimmicks.

Last year Mercury promised that anyone buying its One-2-One mobile telephones after 8 November would be entitled to unlimited free calls on Christmas Day. However, massive demand meant many callers were unable to get through. Mercury reported that at least 20 people had spent more than 12 hours on the telephone. One person spent 12 hours on the phone to Pakistan.

A spokesman from the Telecom Users' Association warned people to think carefully before buying a mobile phone as a gift - more than 20,000 mobile phones will be bought in the Dixons group's stores in this week alone.

He said: "A mobile phone is for life, not just for Christmas. You may think it's great to buy granny a phone but remember you are buying a phone that may cost pounds 300 for pounds 50 or even a tenner. That's a substantial discount and you may find yourself in a contract for 12 months - or counting the three-month cancellation period - 15. You have to make your choice carefully."