Vodafone dampens iPhone price war hopes as it sets launch date

The hopes of an iPhone price war melted yesterday as Vodafone, the fourth group to sell the iconic device in the UK, underwhelmed the market with similar pricing to its biggest rivals.

Vodafone announced it had agreed a deal with Apple to sell the iPhone in September, just a day after Orange revealed it had broken O2's two-year exclusive hold on the sought-after phone.

While Orange started selling the phone in November, Vodafone was forced to wait until the new year, missing out on the lucrative Christmas season. It announced yesterday it would sell the device from 14 January.

The operator will sell the iPhone 3G, first released last year, for £40 a month on an 18-month contract with the handset thrown in free. The 3GS, the newest release which offers quicker internet speeds and longer battery life, has the same pricing tariff, for the 16GB version although the handset costs £89.

Andrew Hogley, an analyst at Execution, said yesterday: "There is no sign of a price war at this stage," adding that there was little transparency over Apple's terms binding the operators.

Orange customers can sign up for the older 3G for £30 a month on a two-year contract and a free handset. The 3GS will have a free handset, and charge £45 a month for two years. It also offers a £29.36 a month deal for an 18-month contract with the device retailing at £184.50. O2 offers similar deals.

Ben Wood, an analyst at CCS Insight, said: "Customers will be disappointed that Vodafone has decided to keep its tariffs broadly in line with rivals, but this comes as little surprise."

Tesco Mobile, which runs off O2's network, was the most aggressive on price after surprising the market by winning the rights to sell the iPhone in November. It offers the iPhone 3G for £20 a month on a 12-month contract, although the handset costs £222. One analyst believes the pricing isn't enough to worry the incumbent operators.

Both Orange and Vodafone have ignored price and looked to take advantage of a perceived weakness at O2, playing up the quality of their 3G networks.

Guy Laurence, who heads Vodafone's UK business, said the group had been preparing its network for over a year to deliver "speed and reliability, something our customers have told us they really value". Ben Wood said: "When marketing the iPhone, Vodafone is likely to focus on network coverage and quality in a challenge to incumbent O2 which has been struggling with network performance."