One 2 One drops free calls deal

MARY FAGAN

Industrial Correspondent

Mercury One 2 One, the mobile telephone operator launched two years ago by Cable & Wireless and US West, is to abandon free off-peak local calls for all new customers. The company, which at its birth shocked the industry with the free calls initiative, said that the market has changed.

Richard Goswell, the managing director, said that under tarrifs to be introduced this month, free local calls would still be available but only at weekends. Mr Goswell said: "The launch package was needed to get us into the marketplace. We needed clear differentials. This is phase two." He said that while some individuals may be worse off, the charging structure still gave customers a better overall deal than its rivals.

Mr Goswell denied that the decisions broke a promise by Lord Young, the chairman of Cable & Wireless, that free off-peak local calls were here to stay. He said: "We had always envisaged that there would be an entry strategy, a medium term and a long-term strategy."

One 2 One refuses to say how many of the 20 million calls carried by the network each week are paid for. The company has more than 300,000 customers and 4 per cent use the service virtually entirely for free calls.

What is not known is how many free calls are made by other customers, 55 per cent of whom are domestic customers and the rest sole traders and small businesses. One 2 One, which launched as a mass-market service, intends to expand its base of business customers.

Mr Goswell said the launch strategy had raised awareness. The number of subscribers is expected to grow from 4 million to 11 million by the end of the decade. "The mobile is now desirable and the period of greatest growth is still ahead of us," he said.

The tarrif packages, to be launched on 18 September, start with an entry offering of pounds 15 per month plus 25p per minute for peak calls and 5p per minute off-peak. The off-peak period now begins earlier, at 6pm, and users are entitled to free weekend local calls.

The more upmarket packages have higher monthly fees but lower peak rate call charges, a free "voice mail retrieval service" and the free weekend local calls. Depending on the package, some customers will be given pounds 50 of free calls, while others will be offered set discounts against BT's charges and free insurance.

One City analyst said that the service would still be much cheaper than Vodafone and Cellnet, but added: "What One 2 One gives with one hand it appears to take away with the other. Lord Young said that free off-peak local calls would stay, clearly they are not. Who knows what will happen in six to 12 months time."

One 2 One also announced a departure in its marketing strategy, separating the sale of the telephone from that of the "smartcard", which is inserted into the phone and holds the user's identity, details of calls made and where they should be charged.

Mr Goswell said it wants to get away from the handset business and to focus on "the business of the minutes of network use".