The best-value iPhone tariffs

Want an iPhone? Good news - the price just fell by £180!

Increased competition has - finally - seen the cost of Apple’s iPhone start to fall after the turn of the year saw Vodafone, Tesco and Orange enter the market. The latest price cut has come from Tesco - the retail giant this week announced it would offer the basic 3G model for £100 in exchange for a 12-month contract.

The move to a standard one-year contract is at odds with the longer deals of typically 18 and 24 months offered by rival operators and may be the most significant iPhone price cut yet. The £35-a-month one-year deal offers unlimited internet access and texts as well as 750 free call minutes.

Tesco has also moved to offer the basic package with next generation 3GS models, at £200 for the 16GB model and £275 for the 32GB model. Customers can also now choose to get a free iPhone 3GS 16GB - with unlimited calls, texts, data and WiFi - on a 24-month contract for just £45 per month – down from £60 a month. That’s a saving of £180 a year!

There has been no confirmation on download limits yet but Tesco currently offers an impressive 1TB monthly ‘fair use’ limit.

Yet before you sign-up for a new contract, and join the estimated 1.6 million iPhone users in the UK, it pays to think about how you intend to use your device and how much you're willing to pay upfront. Think about how many free minutes and calls you’ll use each month, any potentially-costly limits for downloading data and which handset is best for your needs.

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There are currently three versions of the iPhone available - the basic 3G model and the enhanced 3GS models (16GB and 32GB) which come with a faster 600Mhz processor, more memory and an improved 3 megapixel camera with video capability. Bear in mind too that a fourth model is rumoured to hit shops this summer - and the rumours that Apple may then withdraw support for the original 3G model.

To that end, we’d advise opting for a 3GS model - and if you don’t want to pay upfront, you’ll be looking at a lengthy service contract. For basic users, Vodafone, Orange and O2 all offer a free 16GB model with an 18-month contract. Vodafone and O2 offer the cheapest deals at £50-a-month with unlimited texts – both deals offer 1200 free talk-time minutes.

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For heavier users who want the 32GB model, expect to sign up for a two-year contract. The cheapest available tariff here is from Orange - the £60-a-month deal offers unlimited free texts and 1200 free talk-time minutes per month. Alternatively, the £65 monthly package from O2 offers unlimited free call minutes – this deal is only available online.

The Cheapest Tariffs

If you don't want a large monthly commitment, the cheapest entry-level tariff is offered by Tesco - users can sign up for a 12-month deal for just £20 a month. The deal includes unlimited free texts and 250 minutes of free talk-time each month. Expect to pay a hefty additional sum for the 3GS handset of £320 (16GB) or £407 (32GB) - an outlay that makes it less attractive in the long-term.

Perhaps the best compromise is Tesco’s £35-a-month deal above. Among other operators, the cheapest entry level contract is Orange’s £25-a-month deal - but be aware that this two-year contract offers just 75 free minutes and 125 free texts per month. Users will also have to pay an additional £189 for the 16GB device.

Download limits and ‘fair use’

One unexpected outlay can be download charges. All tariffs come with a ‘fair use’ limit allowing a certain level of free downloads and connectivity. These limits vary between providers - Tesco offers an impressive 1TB, while O2 users can buy ‘bolt-on’ packages that offer unlimited WiFi and additional data downloads from £10-a-month. Orange offers a slightly smaller limit of 750GB.

Go beyond these limits, however, and you could end up paying more than the standard tariff. These limits change and are not always publicised - it couldn’t be because they’re a useful revenue stream for the mobile giants, could it?

The expert view

With so many tariffs out there - and so little to choose between them - it pays to shop carefully, says mobile phone expert Andrew Lim of retailer Recombu. ‘The iPhone still isn't cheap but there are a few good deals out there. If you don't want to be on a 24 month contract then Tesco is offering the iPhone 3GS 16GB for £200 on a 12 month contract, paying just £35 per month - with unlimited texts, data and 750 minutes.