One2One has announced it will nearly double the price of its pay-as-you-go mobiles from £40 to £70 in May. The company said it wanted to cut down on "unsustainable" subsidies on pay-go phones and move more customers onto a contract instead.

One2One is owned by Deutsche Telekom, which, along with the other two main European telecoms France and British Telecom, is suffering heavily from a huge debt burden at the moment. Contracts not only make mobile companies more money but also increase "loyalty" - by which we mean people can't be bothered to get a new contract.

The question is: what affect will this have on the rest of the pay-as-you-go market. One2One is the first to admit that its offerings were already the most expensive on the market, but there is no question that these phones are heavily subsidised and taking some of the competitive pressure off the market may see prices creep up. Its spokesman said he "wouldn't be surprised" if its competitors did so. "This is something we generally see happening."

An Orange spokesman said that the company was "considering options" and was "reviewing" the situation. Note that it did not rule out price rises though. We are still waiting for a comment from Vodafone.

The pay-as-you-go phones are particularly popular with teenagers and with their parents as it removes the threat of them running up huge bills. Mobile companies love them too as they see them as getting customers young and nurturing them into loyal brand-lovers. ®