The UK's dominant supermarket chain, Tesco, has thrown its hat into the internet telephony ring.

The company, whose non-FMCG business ranges from pet insurance to loans and reportedly takes £1 ($1.75; €1.45) in every £8 spent in the British retail sector, is to sell special £20 handsets that plug into a PC to provide telephony via VoIP (voice over internet protocol).

This will enable broadband users to make calls just as they would from a normal phone. Consumers calling other surfers using the same Tesco software and hardware will enjoy free calls.

Calling a normal landline from the Tesco handset will cost 2p per minute at all times and 10p per minute to UK mobiles at any time to any network. Calls to overseas phones cost upwards of 2p per minute.

Tesco's entry into the fixed-line telecoms market, in 2003, has not been an unqualified success and it hopes the new VoIP service will be more attractive to British consumers.

The move also represents another assault on the fixed-line telephone business dominated by BT. But the telco has dismissed Tesco's offering as "a poor deal for customers".

Opines John Petter, chief operating officer for BT Retail: "Why would anyone want to pay £1.20 for a 60-minute call at the weekend or evenings when the same call would be just 5.5p with BT?"

Data sourced from Financial Times Online; additional content by WARC staff