Virgin Mobile UK, the country’s largest MVNO, has launched what is understood to be the lowest postpaid contract available in the UK. The firm’s new tariff costs £8.50 per month on an 18-month contract, which includes 100 minutes, 100 texts and the choice of ten free handsets. Four of the phones include free access to Microsoft’s Windows Live Messenger for six months. Virgin says it is able to reduce the cost in part by passing on the 2.5 percent reduction in UK VAT (from 17.5 percent to 15 percent) to consumers.

The £8.50 price point appears to deliberately undercut a £9 per month package currently offered by rival network, 3 UK, launched late last year. Like the Virgin Mobile offer, the 3 deal also includes 100 minutes or texts, or a mix of the two. Virgin Mobile UK managing director Graeme Oxby said that the new £8.50 offer was targeted at “customers tightening their purse-strings… in these financially challenging times.