The pricing plan comes as a surprise because it does not give Britain's second-biggest mobile phone company a competitive advantage, especially on an 18-month deal, where it is slightly more expensive than its rivals.
"I don't think this is about a price war – I think this is a network quality war," said Vodafone UK's chief executive, Guy Laurence. "At the end of the day, customers will seek out the best deal and we are competitive, but it is about the quality of the network. We have spent a year optimising the network for the iPhone.
"It's very simple: now you can get the iPhone on a network you can rely on."
The arrival of the iPhone on Vodafone brings the number of mobile phone companies supplying the device in Britain to four. Vodafone customers who register interest before it goes on sale on 14 January will get free calls to other Vodafone users for the life of their initial contract.
Orange started selling the iPhone last month, ending O2's two-year exclusive grip on the handset, then Tesco arrived this month, complicating matters by opting for 12-month contracts and demanding consumers shell out several hundred pounds for the device itself.
Vodafone's "entry-level" prices for the iPhone over 18 months are about £15 more expensive than Orange and O2, while Tesco does not offer an 18-month contract.
Vodafone's entry-level prices over two years are about £40 cheaper than O2 but almost £75 more expensive than Orange. Different handsets, however, have been pitched by different networks at different price points and with varying bundles of texts and minutes.
The basic iPhone 3G is cheapest with Orange over 18 months, at £624.98, and with Tesco over two years – provided consumers renew their 12-month contract – at £702. But most consumers are likely to want the 16GB version of the faster iPhone 3GS. That is cheapest with Tesco, where it costs £800 over two years for consumers who renew their 12-month contract.
The 16GB iPhone works out at £829.64 for Orange customers, £869 on Vodafone and £909.35 on O2.
Variety of packages
But the packages on offer are very different.
For that price, Tesco offers £60 of calls and texts a month – which works out at about 600 minutes or 1,200 texts – while Vodafone offers 300 minutes and unlimited texts per month and O2 gives customers 600 minutes and 500 texts. In stark contrast, Orange offers just 150 minutes and 250 texts.On the face of it, Tesco and Vodafone offer better '"value'" than Orange or O2 on the iPhone 3GS 16GB over two years. Some people have been put off Tesco Mobile, however, by the fact that it uses O2's network to run its service and the company has been suffering network capacity issues in recent months, especially in London.
With Britain's newest network, 3, having made it plain that it wants to get its hands on the iPhone but unlikely to get it for several months and with T-Mobile having counted itself out of the race for the device for the foreseeable future, the arrival of Vodafone completes the range of choices for UK consumers.
Vodafone is offering all three versions of the iPhone on 18-month and 24-month contracts, the same as Orange and O2. Vodafone's 18-month tariff starts at £30 a month, but consumers will have to pay for their iPhones. The basic iPhone 3G – which has 8GB of memory and a 2 megapixel camera – costs £99, the iPhone 3GS 16GB – which has a 3 megapixel camera and a faster processor – costs £189 and the iPhone 3GS 32GB - which has double the memory capacity - will cost £290.
Over the length of the 18 month contract, therefore, consumers will pay £639 for the iPhone 3G, £729 for the 16GB version and £820 for the 32GB version.
The equivalent 18-month entry-level prices on O2 are £625.73, £713.82 and £803.07. For Orange the equivalent prices are £624.98, £712.98 and £802.48. To get a free iPhone 3G on Vodafone, customers must sign up to an 18 month contract at £40 a month.
Vodafone is also offering all three devices on 24-month contracts. At the basic £30-a-month contract the iPhone 3G will cost consumers £59, the iPhone 3GS 16GB £149 and the iPhone 3GS 32GB £239. Over the two-year period, therefore, consumers will pay a total of £779 for the iPhone 3G, £869 for the 16GB iPhone 3GS and £959 for the iPhone 3GS 32GB.
The equivalent prices for O2 are £822.24, £909.35 and £997.43 and for Orange they are £704.64, £829.64 and £929.64. To get a free iPhone 3G on Vodafone customers have to spend at least £35 a month on a two year contract.
Tesco started selling the device last week and while it grabbed headlines by being the first operator to make the phone available on a contract at £20 a month and lasting just a year, consumers have to pay £222 to buy the basic 3G handset or £320 for the 16GB version of the faster 3GS handset and £407 for the 32GB version of the device.
Over the life of an annual contract, therefore, the 3G phone on Tesco costs £462, the 16GB 3GS £560 and the 32GB version 3GS £647.
Expanding the price over 18 months in order to compare the Tesco deals with O2 and Orange, the iPhone 3G on Tesco costs at total of £582 over a year and a half, the 16GB 3GS costs £680 and the 32GB 3GS costs £767. All these prices are lower than the equivalent prices from O2 and Orange, but only by £35 to £40 over 18 months. Compared with Vodafone's 18 month prices, Tesco is about £130 cheaper.
It is not possible, however, to get an 18-month contract with Tesco so either customers would have to renew their 12-month contract or opt for Tesco's more expensive 24-month contract from the outset.
Doubling-up the 12-month contract leaves the 3G costing £702, the 16GB 3GS £800 and the 32GB £887 over two years.
Anyone signing up to Tesco's 24-month contract, at £60 a month, in contrast, will get the iPhone 3G and the 16GB 3GS for free – rather begging the question why anyone would want the basic 3G phone – while the 32GB version costs £50. Over 24 months, therefore the cost to a consumer of the 3G and 3GS 16GB devices would be £1440 and the 32GB £1490.
O2 sells the basic iPhone 3G for £96.89 on an 18-month contract at £29.38. The 16GB version of the iPhone 3GS is £184.98 on the same contract and the largest 32GB version £274.23. Over the year-and-a-half of the contract, therefore, the devices cost £625.73, £713.82 and £803.07.
O2 gives the iPhone 3G away for free on a 24-month contract at £34.26 a month while the 16GB iPhone costs £87.11 and the 32GB version £175.19. Over the two years, therefore, the prices for O2 are £822.24, £909.35 and £997.43.
Orange sells the basic 3G iPhone for £96.50 on an 18-month contract costing £29.36 a month; the 16GB 3GS costs £184.50 and the 32GB version £274. Over the lifetime of the contract, therefore, the three versions on Orange cost £624.98, £712.98 and £802.48. Or a mere 75p, 84p and 59p cheaper than O2.
Orange gives the iPhone 3G away free on a 24-month contract at £29.36, while the 16GB version of the 3GS costs £125 and the 32GB costs £225. Over the two years, therefore, the prices for Orange are £704.64, £829.64 and £929.64.
Originally posted at: The Guardian