Photo gallery: the UK Apple iPhone launch

Apple’s iPhone, the year’s most hyped gadget, arrived in Britain yesterday with a starting price tag of £899.

The basic handset will cost £269 – £69 more than in the US. But Britons must also sign up to a contract costing £35 to £55 a month with O2 , Apple’s chosen network partner, for a minimum of 18 months. That puts the cost of the handset and contract at between £899 and £1,259 over 18 months.

The gadget – a mobile phone, iPod music player and internet surfer – will be available only on the O2 network. However, several websites claim that they can unlock the device so that it will work on rival networks. It will go on sale on November 9 and be available in Carphone Warehouse stores, O2 shops and Apple outlets.

Some analysts questioned whether the gadget was too expensive to have mass-market appeal. In Britain, one of the world’s most competitive mobile phone markets, most handsets are included in the price of a contract.

James Barford, of Enders Analysis, a telecoms and media research group, said: “Charging £269 for a handset with a contract is very expensive. This is not mass-market pricing.”

But Steve Jobs, the chief executive of Apple, maintained that it was fairly priced. “It is three awesome products in one. It’s a breakthrough phone, leagues different from what you can do today, and it is really easy to use,” he said at Apple’s main store in London. “Sometimes you get what you pay for.”

The handset cost more in Britain, he said, because of VAT and because it was “a little bit more expensive to do business over here”.

Other analysts said that the phone – which has a wide, colour touch-screen and eight gigabytes of memory (about 2,000 songs) – would win on its aesthetic appeal and because of the Apple brand.

Ben Wood, of CCS Insight, the research group, said: “There is no doubt this will be one of the hottest consumer electronics items out there this Christmas. It’s a ‘wow’ product.” The handset has already been snapped up by more than a million Americans – with 270,000 sold within 30 hours when it first went on sale in June.

O2 , which has 17.8 million customers in Britain, beat other mobile phone networks for the right to market the phone. Vodafone, Nokia and Sony-Ericsson are marketing rival devices and services in an effort to prevent their customers from moving to Apple over the Christmas period.

O2 is thought to have agreed to hand back about 10 per cent of subscriber revenues each month to Apple, which aims to sell 10 million iPhones by the end of next year. The Californian group is confident that it will have more success than traditional phone companies in encouraging the use of lucrative “data” services.

Despite spending £22.5 billion on the licences for 3G mobile internet connections, the bulk of their revenues – more than 90 per cent – are still drawn from calls and texts. Unlike many products, the iPhone does not work over third-generation technology. Instead, it uses Edge technology, with speeds somewhere between 2.5G and 3G. For faster speeds, users can connect to “wi-fi hotspots”. Apple is working on a 3G version for late next year. Introducing one now, Mr Jobs said, would have compromised the long battery life.

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