Swedish telecoms firm Tele2 is considering legal action against BT over comments made by the company about Tele2's advertising campaign to support its new competing residential phone service.

Tele2, which has operations in 23 countries, last week became the latest company to take on BT with a cut-price service it claims is up to 80% cheaper than its rival.

On Wednesday BT accused Tele2 of "trying to hoodwink consumers with grossly misleading claims of cheaper phone calls" by comparing its best prices with BT's standard rate. BT pointed out that about half its customers are on one of the three BT Together packages which offer tariffs such as evening and weekend calls up to an hour long for 6p.

But Bill Butler, UK managing director of Tele2, said yesterday that he stood by its claims to be cheaper than BT and was consulting his lawyers.

"This is exactly the sort of trying to muddy the waters that we see when we enter a new market," he said. "We are a serious entrant and they are not going to be able to squash us with something like this."

A spokesman for BT commented: "We are quite happy to stand by our release."