Price War: Tesco Offers iPhone At £20 A Month

Tesco has started the long-expected price war for iPhone customers in the UK, despite the fact that it is offering the device on the same network as rival O2.

Tesco has announced prices for the iPhone 3G S, which include a £20 a month, 12-month contract for customers who don’t mind paying £222 up front. That works out at a total of £462 over the contract period, plus any extra calls outside the plan – which does include a very generous 1Tbyte data limit.

When Tesco announced last month that it would be selling the iPhone, it hinted at “a bit of Tesco value” but many observers dismissed the possibility as the Tesco Mobile operator would be providing the phone and network service under licence from rival O2.

However, analysts have been predicting iPhone price cuts, as the device is set to face competition from Android phones in 2010 – particularly the Motorola Droid, which beat the iPhone in an influential Time Magazine list of the gest gadgets of 2009.

Droid has the benefit of real multi-tasking and the fact that Android is open source and can run on multiple platforms may be a benefit.

O2’s monopoly on selling the iPhone in the UK has only just opened, with other operators selling it, including Orange and after Christmas Vodafone. T-Mobile is merging with Orange in the UK, and the other mobile operator, 3 has said it hopes to have the iPhone.