O2 has responded to increased competition within the UK iPhone market by cutting the price of its tariffs. The network is also set to offer SIM-only contracts.

The move follows the loss of O2's deal with Apple that saw the carrier sell iPhone handsets exclusively from launch up until the end of 2009.

Now, three other operators - Orange, Tesco Mobile, and Vodafone - are all eating up iPhone share, with O2 reacting to claims its own tariffs simply aren't competitive enough in this expanded market.

As a result, O2's cheapest contract has been shaved from £30 per month to £25 per month, 100 minutes, and unlimited texts and data part of the deal. The premium contract has also been cut, the £60 per month deal dropped to £45 per month.

Existing customers haven't been left out either.

The network offering a SIM-only deal for those who already own a handset. As such, a 12 month contract - which comes with 300 minutes, unlimited UK texts and wi-fi - will set customers back £15 per month, an alternative 30-day rolling contract from £20 per month ensuring all bases are covered.

"Customers’ habits are changing, with more texts being sent and data being used than ever before. We have listened to our customers and introduced a range of new tariffs with unlimited calls, texts and data offering real value for money," said O2 marketing director Sally Cowdry.

"We have also introduced a new £2 per day Internet Tethering Bolt On as we know our iPhone customers want to snack when they are using their iPhone as a modem. We have always been the home for texts and now want to extend that to being home for data."

Arguably, it's the arrival of Vodafone on the scene that has caused O2 the most upset.

The carrier managed to sell a record-breaking 50,000 units on its first full day as an iPhone retailer, a recent report - ironically enough, commissioned by O2 - also concluding that Vodafone has the fastest mobile phone web access in the most cities across the UK.

It's an angle Vodafone has seen fit to exploit in its marketing, the company proclaiming that the iPhone is now available on a 'network you can trust'.

Marketing Week