iPhone at Tesco - tariff analysis

So the barrow boys have finally struck. As soon as the UK realised that Tesco was about to get hold of the iPhone, the expectation was for immediate price cuts. So the announcement of a one year contract for a 3G or 3GS phone at just £20 per month is no surprise.


However, if you take a look beneath the headlines, the good news arrives with a number of caveats. Firstly, that one year offer forces you to pay £222 for the iPhone 3G handset up front or £320 for the faster 3GS.


But what does that work out as in monthly terms? You're looking at around £47 per month for a 3GS from Tesco over 12 months. Compare that with only £38 per month for a 3GS via an O2 contract over 24 months (which asks you to pay just £87 up front for the phone itself).


Also, the £20 Tesco tariff only offers you '£60 of calls and texts' - which sounds like a mix and match credit pot to draw from. Compare that with 600 minutes of calls and 500 texts per month via O2 which averages out at £170 per month in free calls/texts alone, almost three times as much.


The Tesco deal only comes into its own the longer you keep it. Because, once that initial iPhone cash outlay is paid off, the cheaper tariff kicks in - but only in the second year. So, if you keep the Tesco's contract for two years, the average costs drops dramatically to just over £33 per month. Tesco also offers half price calls via five nominated numbers, which could be worked to your advantage.


Don't ignore the Unlimited Calls & Texts tariff, either.  It asks you to sign for two years and offers free calls, texts and browsing for £60 per month. This initially appears a lot. However, if you use your allocation for this particular tariff, every month (and with this amount of free calls/texts you can safely dump your landline), then this is the best value iPhone tariff currently on offer, anywhere in the UK. It beats the 'similar' O2 and Orange tariffs, available for just under £75, saving you £265 per month on the basis of a cheaper line rental and 2,500 extra free texts per month. 


The bottom line? If you're after an easy entry tariff, avoid the Tesco deal and choose O2's £35 per month, 24 month contract, which has the much cheaper initial outlay. If you want a 'cheap' two year deal, choose the Tesco £20 per month, one year tariff and stay the extra year. If you're looking for a 'value' tariff, choose Tesco's £60 per month, 24 month contract.

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