BT to cut phone bills by £15

A new telephone price war broke out today when BT moved to cut bills for millions of customers.

It scrapped its most expensive call rate, resulting in savings of about £15 a year on the typical residential bill.

The move comes on the eve of a new cut-price fixed line service from mobile company Carphone Warehouse.

Tomorrow it will announce that its 400,000 Talktalk customers will be able to call each other free. BT's move is a rapid response to criticism from the Commons Public Accounts Committee as well as the growing competition from rivals.

It is abolishing its standard rate for calls and moving all customers onto its BT Together scheme, which allows extra discounts on calls to regularly used numbers. BT, which has hung on to more than 70 per cent of the home phones market, will raise its basic line-rental charge for nine million customers currently on the standard rate.

MPs said yesterday that the industry regulator Ofcom should do far more to encourage customers to switch. BT's moves reflect cut-throat competition with more than 100 businesses fighting to capture the fixed line market and more people abandoning home phones in favour of mobiles.

Jenny Evans, spokeswoman for uSwitch, said: "Broadly, today's price changes are positive and most people will save money. An average customer currently on BT Together Option 1 should save £15.03 a year. But very, very low users could see their bills go up and anyone using a carrier pre-selection service will see their bill rise by £12 a year."

Tomorrow Carphone Warehouse, which has attracted some 400,000 people to its Talktalk fixed-line service, will turn up the heat on BT by announcing its customers will be able to call each other free.

BT said that now 14 million customers would pay 3p a minute for daytime calls and 5.5p an hour at evenings and weekends compared with up to 60p on the old rate. It is also cutting the cost of line rentals, with BT Together Option 1 charges coming down from £11.50 a month to £10.50 a month.

Line rentals rise for the nine million people on standard rate because the current £9.50 a month is being abolished. This will also hit people who use socalled pre-selection carrier services like OneTel and Tele2 who have to pay BT line rental.

Gavin Patterson, managing director BT consumer and ventures, said: "The changes make BT highly competitive against most of our rivals."

From tomorrow, customers to BT's directory enquiries face higher charges.

Calls to BT's 118 500 service will be 40p as against 25p - although the price per minute rate halves to 15p. BT is the third operator to raise its enquiries charges since the 192 service ended last August.