Tesco launched its pay-as-you-go mobile phone service at 73 Extra stores this week and will roll it out to 550 stores from October. Contract phones will be launched in 2004.

A 50-50 Tesco Mobile/O2 partnership, the service offers calls at a rate of 20p a minute, said Tesco Mobile CEO Andy Dewhurst.

Handsets cost from £69.99, but a launch promotion will give customers £25 off if they spend £25 in store.

Dewhurst said incentives to get customers to top up their phones at Tesco stores included four Clubcard points for £2 talktime sold through Tesco, compared to one point for £2 sold through other outlets. He added that E top-up was available from 41,000 outlets.

But Tesco mobile has caused controversy among independent retailers unhappy at being asked to sell top-up. (The Grocer, August 18).

A spokesman for PayPoint said it had decided retailers would not have to service Tesco mobile if they did not want to.