Onetel, the telephone firm owned by the UK's utility business Centrica, has launched a mobile phone service.

The company is now the sixth to offer mobile phone services in the UK, after Vodafone, Orange, O2, T-Mobile and Virgin.

Onetel �5 contract no free minutes

Off-peak call to landlines - 5p Peak calls to other mobiles - 40p Text messages - 10p

It does not have its own network, but will buy airtime from Vodafone at wholesale prices and then re-sell the minutes to customers under its own deals.

The UK mobile phone market is saturated, with almost everyone who wants a mobile already owning one.

But there is stiff competition between the firms to offer the most appealing - or the most profitable - deals.

Middle ground

A Onetel spokesman told BBC News Online that it was very aware of the market saturation, but had spotted a gap in the market for light users.

The likes of Vodafone, Orange and O2 say they no longer want to lure the lowest-spending customers, aiming to increase their average revenue per user instead.

Orange �13 contract 20 free minutes

Off-peak call to landlines - 10p Peak calls to other mobiles - 35p Text messages - 10p

Virgin, meanwhile, is concentrating its efforts on scooping up the lightest users who pay as they go.

Onetel is targeting customers in between the two extremes, offering a monthly contract at just �4.99 with no free minutes included.

The cheapest contracts at both Vodafone and Orange cost �12.99 but include 20 free minutes of talk time.

Broad package

Onetel will initially target its mobile service amongst its own 850,000 customers, before launching a broader marketing campaign.

It has built up its landline users through an aggressive advertising campaign that compares Onetel prices to those of BT.

It is now aiming to sell a complete communications package, to complement its landline and internet services.

Centrica is using its core customer base at British Gas to expand into a variety of other markets, including car insurance, financial services and telecoms.