Tesco Offers £20-a-month iPhone

from Brand Channel - Stephanie Startz, December 11th, 2009

Consumers disappointed by the tease of an iPhone price war between Orange and O2 can rejoice: Tesco has raised the stakes.

Tesco Mobile is offering a £20-a-month iPhone, but the offer is not without its caveats. Subscribers must pay, on top of a one-year contract, £222 for a standard 8GB model and £320 for the 3GS 16GB model. Consumers interested in a free handset, as Orange and O2 offer, can sign up for a two-year contract priced at £60-a-month.

Tesco's one- and two-year contracts remain the most competitive in Britain, besting Orange and O2's 18-month contract of £624 and £713 and £626 and £714, for the 8GB and 3GS 16BG, respectively.

Detractors argue that Tesco's strategy runs counter to how Britons are accustomed to purchasing mobile plans, but Lance Batchelor, chief executive of Tesco Mobile, believes that the traditional two-year plan will satisfy those looking for a free handset and that the competitive £20-a-month plan will convert shoppers.

The ace in Tesco Mobile's pocket is the Tesco supermarket chain, where the iPhones will be sold. "Unlike our network rivals, we're part of the shopping trip, with our customers coming into our stores week in, week out," said Batchelor. (Note: "network rivals" -- Tesco Mobile wants to be a leading telecom brand.)

Tesco's attempts to gain market share have recently been thwarted despite the chains aggressive Clubcard promotions. Some analysts blame Tesco's foray in clothing and electronics sales for their hampered sales. The grocer has become eclipsed recently by more focused competitors: Waitrose, Morrison, and Asda.

Tesco is hoping its Clubcard scheme and iPhone price war assist in reclaiming market share during the lead up to Christmas.