Free calls offer as telecoms price war hots up

Free local calls will be offered to British households this week by Carphone Warehouse as a price war in the telecoms sector gathers pace, it was reported today.

The move would be a direct challenge to the dominance of BT in the British fixed-line market, with Carphone seeking to eat into its rival’s 70% market share.

Newspaper reports said Carphone is planning to offer free local phone calls to users of its fixed-line TalkTalk service.

It is also understood to be preparing a new promotional campaign involving actress Maureen Lipman, who famously fronted BT’s adverts in the 1980s.

An offer of free local calls would signal further confidence among Carphone executives in the TalkTalk service provided by Opal – the telecoms group acquired for £65m (€97m) a year ago.

Regulatory changes in 2002 enabled groups such as Carphone to compete with BT in the fixed-line market. Customers can now pay line rental to BT but have all their calls automatically switched to TalkTalk rates without having to dial a separate access code.

The London-based retailer is expected to announce this week that it has achieved its target of attracting 400,000 customers to TalkTalk.

Despite the loss of income from local calls, Carphone would continue to make money from TalkTalk by charging for calls to national, international and mobile numbers.

Shares in the company have more than doubled over the past 12 months and the free calls offer could give them a further boost.

In a trading update in January, chief executive Charles Dunstone said stronger-than-expected trading in the final three months of 2003 meant full-year profits were likely to be ahead of market hopes.

Carphone, which manages customer accounts for mobile networks as well as selling mobile phone accessories, said revenues in its retail and distribution operations grew 27.7% on a like-for-like basis.