Tesco will begin selling the Apple iPhone 3G and 3GS before Christmas in a surprise move that may spark a price war.

The exact pricing and launch date have not been confirmed but Tesco Mobile said that it expected to sell the handset in its stores and via Tesco Direct “shortly”. That means that customers picking up a turkey and a Christmas pudding may also be able to throw an iPhone into their trolley.

The UK’s fastest-growing mobile operator will offer both contract and pay-as-you-go deals. It is still in discussions with Apple about the exact pricing and start date.

The move is a blow to both Orange and Vodafone, which have fought hard to win the right to sell the handset after O2’s exclusive two-year agreement with Apple lapsed this month.

With Orange hoping to attract substantial numbers of new customers after launching the iPhone in time for Christmas and Vodafone not able to launch the phone until next year, Tesco’s entry into the market could offer potential new customers a cheaper alternative in the next month.

Tesco’s move will be welcomed by consumers who had hoped that Orange would kick off a price war, only to be disappointed when the operator revealed a pricing structure similar to that offered by O2. However, with Tesco potentially shaking up the market, more people may be able to afford an iPhone.

The iPhone move is a coup for Tesco Mobile, 50 per cent owned by O2, which has beaten not only Vodafone, but also T-Mobile and 3, in the race to sell the handset. For O2, the move makes sense as it moves to focus its efforts on the Palm Pre, which it sells on an exclusive basis.

Orange also sells the iPhone in supermarkets through kiosks in Asda.

Tesco, the UK’s largest retailer, revealed plans last week to strengthen its broadband and fixed-line telecoms positions. It hopes to generate £2 billion in annual sales and £200 million in profit in the medium term.

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