Not to be outdone by Google's recent bold email offering, Yahoo said that it plans to dramatically raise the storage limit given to its free email users while at the same time bumping its premium subscribers up to a "virtually unlimited" capacity.

The storage hikes were announced by Yahoo executives at an analyst meeting last week, where the company was keen to show that it is ready to take on rival Google, which grabbed headlines with the announcement that it is planning to offer a free email service with a 1GB limit dubbed Gmail.

Responding to the Gmail offer, Yahoo plans to raise the storage limits for its free email users later in the second quarter or third quarter of this year from the current 6MB to 100MB, a spokeswoman for the company confirmed.

Meanwhile, premium subscribers - who currently pay close to £28.25 a year for 100MB of storage - will be given "virtually unlimited" capacity later this year, the spokeswoman said.

Jupiter research analyst Olivier Beauvillain said that the extra storage offering was a necessary move.

"I think all the web-based email providers like Yahoo and MSN Hotmail need to react to what Google will launch," Beauvillain said.

"The main factors distinguishing different email services are storage and antispam features," he said, "and it's easier for users to compare the size of inboxes."

"Yahoo and MSN really can't maintain their lower storage offers against Gmail," Beauvillain said.

Executives from Sunnyvale, California-based Yahoo did not say exactly how much new storage capacity premium subscribers will receive but the spokesman confirmed that it was "on par" with Gmail's 1GB limit, which lets users save about 500,000 pages of email.

"Basically it will be hard for users to perceive that there is a limit," the Yahoo spokeswoman said.

London resident Rob Cave uses Yahoo's free service for his main email account and said that he was very happy about the extra space.

"A hundred megabytes is absolutely fantastic because I was bumping at the edge of my limit and there's a lot of email I don't want to download," he said.

Cave said that the move will definitely keep him in Yahoo's hands, although he was not tempted by Google's 1GB offering because of privacy concerns.

Gmail is still in beta but has already come under scrutiny for its plan of scanning email messages and placing advertisements that it thinks are relevant next to them.

However, Beauvillain does not believe that privacy concerns will stop many users from adopting Gmail, adding that Google has already expressed its intention to address the issue. What may stop users from switching to Gmail is simply the hassle of changing email addresses, he said.

"MSN and Yahoo have an existing base of users and they tend to be loyal to their email provider because it's such a pain to switch and notify all your contacts," Beauvillain said.