Vodafone says: 'Pay more as you talk'

UK mobile phone handsets have traditionally been heavily subsidised and used as weapons in the companies' struggle to boost subscriber levels and market share.

But as the market nears saturation, cash-strapped networks are having to reign back spending and are beginning to concentrate on customer retention.

Last week, Vodafone chief executive Chris Gent announced that the company was shifting its focus away from acquiring new customers onto retaining existing ones, and trying to make more money from them.

From 1 March 2001, Vodafone will be cutting the bonuses it pays to resellers for connecting new customers by £12.

The company said in a statement: "As a result of this change, Vodafone UK expects the price on the high street of its Vodafone 'Pay as you Talk' packages to be in the region of £70 for entry-level products, although distributors and service providers will themselves determine their own retail prices."

An entry-level phone such as the Siemens A35 on Pay as you talk currently costs £39.99 at the Carphone Warehouse.

This change almost exactly mirrors Friday's announcement from One2One, increasing the price of entry-level mobile handsets from £39.99 to £69.99.

Handset subsidies have traditionally been so high in the UK that smugglers have been buying prepaid handsets in bulk and transporting them to Eastern Europe, where they can be sold at a profit. The scale of the problem is not known but it is known to cost UK mobile networks significant sums.