The store chain unveiled three price plans on Monday, and said that customers could cut the cost of their home phone calls by up to 30%.

"By providing competition we will encourage our customers to look hard at their bills and shop around, as they already do for things like car insurance," said Tesco Telecom chief executive Andy Dewhurst.

The store hopes its Tesco Talk offering will cut into the BT's hold on 73% of the residential landline market.

Under its standard package, for no monthly charge on top of line rental calls will cost one penny a minute for UK evening and weekend calls and 2.5p a minute during daytime.

For �5 a month, evening and weekend calls will be free for the first 70 minutes, and cost 0.8p a minute after that. Daytime calls will still cost 2.5p a minute.

For �15 a month, all UK calls are free for the first 70 minutes.

Users will still have to pay �9.50 a month for basic line rental to BT.

Rivals

BT started its fightback against rivals by introducing its own all-you-can-use call packages in June.

It has 10 million customers on its Together plans, which start at �11.50 for a 6p charge on evening and weekend calls of up to an hour.

Daytime UK calls still cost 3p a minute, against Tesco's 2.5p a minute charge.

BT also offers bigger free-call packages for higher monthly fees.

The market is getting more crowded, with Carphone Warehouse launching its talktalk service earlier this year.

Tesco's rival Sainsbury's is planning to resell Carphone Warehouse's services as well.