Vodafone Opts Not To Trigger iPhone Price War

Tom Jowitt is a leading British tech freelance and long standing contributor to TechWeek Europe

Consumer hopes of a price war for the ever-popular iPhone were dashed after Vodafone confirmed that it would not undercut its rivals

Vodafone has confirmed it will sell the popular iPhone handset from 14 January, but it will not trigger a price war with rival UK operators.

Vodafone has missed the Christmas rush for the device after O2’s two-year exclusivity contract expired in November. Orange was the first operator (other than O2) to sell the device after it launched the iPhone on its network on 10 November.

Analysts had predicted an iPhone price cut, and this seemed even more likely when earlier this month Tesco said it would offer the handset for purchase at an initially steep £222 up front cost. However, this included a £20 per month, 12-month contract (on O2’s network), which worked out at £462 over a one year contract.

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In comparison, Orange is offering a 16GB iPhone 3GS for £29.36 per month, on a 18-month contract, that will cost £712.98 over its lifetime, including an upfront cost of £184.50 for the handset. O2’s tariffs meanwhile are pretty much the same with the handset costing £29.38 per month, on 18-month contract, which will cost users £713.82 over the lifetime of their device, including the £184.98 initial outlay for the phone.

Vodafone therefore decided not to rock the boat with its tarrifs for the iPhone, and indeed its cheapest deal for the 16GB iPhone 3GS works out as more expensive over the lifetime of the device than any of its competitors.

An 18-month contract will cost £40 per month, and including the £89 purchase cost for the iPhone itself, meaning users will have spent £809 on the phone and monthly payments in total.

“On certain tariffs the iPhone is free,” said a Vodafone spokeswoman, speaking to eWEEK Europe UK. “We are not going out with a price war, but instead we are offering value for money with the best customer experience due to the huge investment we have made in our network. Customers will therefore have a superb experience. It is not about being the cheapest.”

In truth, UK operators have little pricing flexibility for the iPhone, as Apple demands a much greater control of operators’ business plans, and a share of revenue, which is unprecedented in normal operator-manufacturer contracts. This means that the competition is not as fierce as some consumers might hope.

As for the other UK operators, T-Mobile is merging with Orange in the UK, and 3 has said it hopes to have the iPhone soon.