Asda has extended the supermarket price wars to mobile phones by halving its pay-as-you-go charges while traditional rivals, including Vodafone, are raising theirs.

The supermarket group said that it would cut its flat-rate calls from 16p to 8p, with the price of texts falling from 5p to 4p, from September 1.

Asda, which has 150,000 mobile customers, now claims to be the cheapest pay-as-you-go operator in Britain, undercutting its cheapest rival, Ikea. The Swedish furniture giant introduced a mobile phone package this month for members of its loyalty card scheme, with calls at 9p per minute.

While retailers undercut each other on mobile phone packages in an attempt to attract Britain’s 47 million pay-as-you-go users, traditional mobile operators are raising their prices. Next month, Vodafone will increase its minimum call charge for pay-as-you-go customers by 30 per cent, from 15p to 20p. O2 , T-Mobile and Orange have also increased pay-as-you-go tariffs.

Industry analysts say that Asda, which uses Vodafone’s network, and other retail giants tend to use their mobile offers more to increase customer loyalty and to expand their brand than to make money, so they are willing to charge less. The big mobile operators, however, are under pressure to recoup lost earnings as regulators cap prices such as termination rates – the amount that the networks charge each other and companies such as BT to connect mobile calls – leading to price increases.

Asda, Tesco and Sainsbury’s each cut the price of milk last week to attract customers affected by increasing food prices. Tesco was criticised yesterday by the Advertising Standards Authority over a misleading pro-motion that claimed its products were cheaper than those at Asda and Morrisons. Craig Thirkell, buying manager for Asda Mobile, said: “We’ve been working on this [phone offer] since we saw the downturn in the economy. We wanted to offer a transparent tariff with no hidden costs as customers are strapped for cash.”

Mobile phone tariffs are notoriously difficult to compare directly because they can include various add-ons of minutes or texts. However, a spokesman for uSwitch, the price comparison website, said that Asda’s pay-as-you-go tariff was the cheapest flat rate in Britain. He said: “It’s good for Asda because it gets people into their store and they hope they will return to top up their phones and do some shopping.” He said that although margins were very low on calls to mobiles, Asda could still make a profit of 6p per minute from calls to landlines.

Mobile operators are keen to sign up with retail groups, who buy wholesale minutes from their networks. Other mobile virtual network operators include Tesco, which uses the O2 network. Virgin Mobile, which has a wholesale deal with T-Mobile, is the biggest virtual operator in Britain, with 435,000 customers.

Charlotte Patrick, principal research analyst at Gartner, said that virtual operators could survive with a much smaller customer base because the service was relatively cheap to run. She said that mobile operators always worried about rivals undercutting their prices, but questioned whether they would chase customers at the lower end of the market because they tended to have less money to spend. PhonepayPlus, the premium phone line regulator, has issued a £200,000 fine for a scam that tricked people into calling high-rate numbers. Jack Bar-nard Telecom Services made unsolicited calls to business, home and mobile numbers, who heard a man’s voice before being cut off. Those who returned the call were charged up to 50p a minute.

Fully charged

Rates per min to national numbers/other networks, and text rates

Asda Mobile 8p (flat rate) 4p (cost of texts)

Ikea Family Mobile 9p 6p

3 Mobile (Flat 12 tariff) 12p 12p

Virgin Mobile (Daily Bonus tariff) 15p NA

Tesco Mobile (Standard tariff) 20p 10p

T-Mobile (Mates Rates tariff) 25p 10p

O2 (Talkalot tariff) 25p 10p

Vodafone Anynet tariff 30p peak/10p off peak 10p

Orange (Any Time fixed rate) 35p other networks, 25p to landlines 10p

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