ASDA to kick start mobile pay-as-you-go price war?

Supermarket chain ASDA says it is to slash its pay-as-you-go (PAYG) mobile phone rates from the start of September, potentially sparking a price war in the UK.

The supermarket, which is owned by US retail giant Wal-Mart, revealed it is cutting prices in half following announcements from other leading phone networks of price hikes.

ASDA Mobile's new price plan means customers will be charged 8p a minute to make phone calls while text messages will cost 4p each.

ASDA's trading director Darren Blackhurst said in a statement: "We are totally committed to giving our customers the lowest prices in Britain every day of the year. We are giving customers the UK's cheapest mobile call plan that's simple to understand and a tariff with no hidden extras."

ASDA's mobile phone service is actually run on Vodafone's infrastructure, a trend which sees a company without any allocated radio frequency become a mobile virtual network operator (MVNO) through a licensed operator. Similar MVNO deals include partnerships between Ikea and T-Mobile and Tesco and O2.

Vodafone's PAYG customers will be making calls for 20p per minute - an increase of 5p per minute. Vodafone announced increases after rivals T-Mobile and O2 raised their pre-pay call charges this summer. T-Mobile calls will now cost between 10p and 25p depending on the tariff.

O2, which has 11.5 million pre-pay customers, has doubled its minimum call charges for customers who have not upgraded to a new tariff.

Commenting on ASDA's price cut, Dean Bubley, analyst at researcher 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.

"[ASDA] already have 150,000 customers and they can expect to boost that significantly in a market where customers like to find the right deal."