8th March 2006 - A mobile phone price war is on the cards this month as T-Mobile's new Flext tariff is available, it has hit the market just weeks after 3 announced it would be giving money away to pay-as-you-go customers whenever they receive calls and texts.

As if it is not confusing enough already to compare mobile phone tariffs, new deals from T-Mobile and 3 adopt a different approach to pricing.

Not surprisingly, many people don't switch providers to get a better deal, although a recent Which? survey found that 45 per cent of adult pre-pay customers could save money by taking out to a contract. And nearly all mobile phone users on contract could save money by switching to a better deal, it says, but 22m people - 70 per cent of mobile users - have never changed plans.

T-Mobile's new tariff is certainly innovative. Whereas most tariffs give customers a set amount of inclusive minutes and texts each month, Flext gives customers inclusive value that can be spent how the customer chooses: on voice calls, texts or picture messaging.

T-Mobile expects its most popular price plan to be Flext35. This gives users £180 worth of calls, texts and pictures across all networks for £35 a month. Calls are charged at 20p/min, picture messages at 20p and texts cost 10p. So the £180 worth of monthly credit equates to 900 voice minutes, or 1,800 texts or, more likely, a combination of calls and texts. Users will get a free weekly text message telling them how much credit they have left for the month.

Flext price plans range from Flext20 at £20 a month offering £34 worth of calls and texts, to Flext75 at £75 a month which gives you £390 worth of value a month, equating to a massive 1,950 voice minutes or 3,900 texts.

Potential downsides of the deal are that you have to commit to a lengthy 18-month contract and if you do go over your inclusive calls or text limit, charges are high at 20p/min for voice calls compared with 10p/min on most of T-Mobile's other calling plans.

Anthony Ball of mobile tariff price comparison website Onecompare.com says Flext offers a pretty good deal compared with most high street tariffs. "I like the way it's flexible and doesn't have set allowances for texts and minutes. But it doesn't compete with some cashback deals offered by online retailers at the moment."

Cashback deals are typically offered by online retailers. These companies negotiate volume deals with providers and then pass on the discounts in the form of reduced line rental for set periods to customers. Cashback deals usually involve paying your line rental up front as normal and then filling in forms and reclaiming money from the retailer at up to five points during your contract. If you forget to do this, you will not get the discount and the latest figures suggest about 50 per cent of cashbacks go unclaimed.

You pay the line rental monthly, as normal, but claim it back from the retailer in months four, six, eight, 10 and 12 of your contract. Each claim is initiated by sending in a claim form and the right monthly bill within 28 days of the bill. But do it too late at any point and you will not get your cash.

OneCompare is in the process of setting up a reminder service so that people who sign up to cashback deals through the site get an e-mail or text reminder when they are due to claim their cash back.

Unlike T-Mobile's deal, 3's latest offer is aimed at the pay-as-you-go (PAYG) market. With PAYG you buy the phone outright and top up your credit either by buying vouchers or using a credit card. So, you never receive a bill.

3's WePay rewards customers with a cash credit for all calls and texts they receive. Those signing up get a 5p credit for every full minute of a received call, and 2p per text, which they can claim each time they purchase a top-up voucher. The credit can be used to purchase any 3 services, from texts and calls to buying music tracks and watching television on their mobile. Effectively, those that receive a lot of calls but only make a few can operate a free phone.

Graeme Oxby, 3's marketing director, says: "Anyone who regularly receives calls and texts could end up much better off by moving to 3." Ball isn't so sure. He says 3's offer is not particularly competitive and, more importantly, riddled with conditions and get-out clauses.

"Quite a lot of calls and texts are not eligible such as calls to and from 3 customer services and premium rate texts," says Ball, "Also you only get credit for full minutes of received calls. So if I received a call for 1 minute 59 seconds, I only get credit for 1 minute. But the biggest thing is, you are only eligible for a cash credit up to the value of the top-up voucher."

This means that if you bought a £10 voucher to cover call costs and then received 300 minutes of incoming calls, worth £15 in credits under the 5p-per-minute scheme, you would only be able to claim £10 worth of credits.

Once you have got credits for your 3 phone, either through receiving calls or buying a voucher, calls to mobiles on rival networks are expensive. WePay users pay 30p/minute compared with the 15p charged by providers including Tesco and Carphone Warehouse's Fresh. Texts also cost 10p to send compared to 5p with the others.

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