Asda slashes pay-as-you-go mobile costs

Asda has said it will cut the charges for its pre-pay mobile phone services in half from the start of September.

The supermarket will be offering customers calls for 8p per minute and texts for 4p, which it claims will be the “UK's cheapest mobile call plan”.

However, analysts are at odds as to whether the announcement will spark a price war between the UK’s other operators.

Dean Bubley, analyst researcher at Disruptive Analysis, said: "It is a big move by a big name and could ignite a price war. Expect to see a round of moves, especially with customers being so price-conscious.”

Stephen Hartley, senior analyst at Ovum, disagreed. He suggested Asda had put its prices down to rival Tesco’s pre-pay service, which charges customers 20p per minute and 10p per text.

“Both supermarkets offer no frill mobile phones but Asda has not done as well as Tesco in terms of attracting customers, so is focussing on the price to draw them in, " he said.

“If there is a price war, it will be between these two and will be similar to a price war on baked beans, for example, rather than the big mobile phone operators who gain their customers through brand perception."

Tesco, T-Mobile, Vodafone and O2 all denied that they would follow Asda's lead and cut prices. They said they offered their customers packages that worked out to be more cost effective than flat-rate charges.

A representative for Tesco said: “We know it is the overall value of the package, not just the call and text rate, that customers look at when deciding which provider to choose. We're confident we deliver unbeatable all round value.”

Ikea mobile, which has recently launched a similar no-frills service, also said it would not be following Asda’s lead. A representative for the company said: “We have no plans to cut our call rates which, until Asda introduces these prices, are currently the lowest on the market.”

Vodafone, which leases its infrastructure to Asda, said it was up to the supermarket to set its prices. A representative for the company said: “We have no plans to reduce our prices.”