phones 4U is slashing handset prices in a bid to leapfrog Carphone Warehouse (CPW) into UK market leadership.

phones 4U is to spend £20m on the campaign, called phones 4 Less. It could use up its war chest very quickly if the competition responds in kind, for the company is guaranteeing to undercut all competitors on handset price. If a customer buys a phone and finds the same model cheaper elsewhere, phones 4U will refund the money and shell out another 20 per cent of the value of the phone.

CPW is certain to respond if it feels threatened. But does this mean it would have to cut prices in all shops, or merely in areas where there's a phones 4U in the vicinity? We should note that any price war is not bi-polar - this will draw in The Link and the indies. So if phones 4U is to gain market share, then this will not necessarily come at CPW's expense.

So why is phones 4U turning the price screw? Judging from comments made by Anthony Catterson, MD, the company is deploying attack as the best form of defence. "We need to be market leader. It is a very tough market out there and we think there is going to be a lot of consolidation over the next 18 months. Increasing our market share is the best way to protect ourselves in that environment." ®