iPhone will be available on a 12-month contract for £20 a month, but will cost £222 upfront.

In the UK, the Apple iPhone will soon be available with Tesco, as well as Orange and O2.

Tesco today announced its iPhone tariff and revealed it will become the first company to offer the phone to customers on a 12-month contract.

The iPhone is already available on O2 and Orange, but until now buyers either had to sign up for an 18-month contract or pay the full price for the phone and opt for a pay-as-you-go plan.

Last month, the supermarket giant announced it was in talks with Apple to start selling the iPhone. It had promised to bring a bit of “Tesco value” to the must-have phone of the past two years.

This morning, the retailer said that from 14 December the iPhone 3G and iPhone 3GS would be available from just £20 a month, the lowest monthly contract price in the UK market – although they come with a hefty price tag.

The 3G phone will cost £222 to buy alongside the 12-month contract. Buyers wanting the more upmarket 3GS phone will have to pay £320. The £20-a-month contract includes £60 of calls and texts.

Tesco Mobile will also offer the iPhone 3GS for free with unlimited calls, texts and browsing on a two-year contract, but it will cost £60 a month.

The 12-month deal is expected to appeal to customers who want a short contract. Until now the only affordable way to get an iPhone has been to sign a contract for 18-months. O2 and Orange, the only companies currently selling the phone, charge an up front fee of £87 and £35 a month for 18 months.

Tesco is also offering the iPhone 3G and 3GS on its Triple credit pay-as-you-go price plan. All Tesco iPhone customers will have at least 12 months free unlimited data and access to the BT OpenZone Wi-Fi (UK) service.

Lance Batchelor, chief executive officer of Tesco Mobile and Tesco Telecoms, said: “iPhone is now available and affordable for all, with the best deals in the UK market.

“This is a fantastic announcement for us and we’re delighted to make iPhone available to our customers. It shows what a serious player in the mobile market Tesco Mobile has become.”

Vodafone is to start selling the iPhone in January.