O2 logo 60 O2, Apple’s original exclusive iPhone carrier, has announced its UK pricing for the hotly anticipated iPhone 4. It doesn’t take too much looking at O2’s tariff/price list to bring on as much confusion as an iPhone confronted by a Flash site.

Take a look at the O2 iPhone 4 price list.

O2 iPhone 4 price chart 1

Now take a closer look. (Yes, you need to if you're squinting at the table above.)

O2 iPhone 4 price chart 2

That’s right, the handset costs more if you tie yourself down to a 24-month contract than if you go for an 18-month one.

How does that work? Who in their right mind would go for that offer? Surely the longer the contract the cheaper the handset…

Now do the maths.

If you want the 100-minutes-a-month iPhone 4 (16GB) you pay £209 on the 18-month contract but a stonking £279 on the longer 24-month contract. So far, so dumbfounding.

Where you actually save is on the £5 cheaper monthly fee.

The total 18-month, 100-minute contract (handset and monthly fee) costs £749, or £41.61 per month [18 x £30, + £209, /18].

The total 24-month, 100-minute contract (handset and monthly fee) costs £879, or £36.63 per month [24 x £25, + £279, / 24].

So the longer contract is cheaper, after all.

But O2 is playing a dangerous confuse-the-customer game here.

The table then appears to suggest that on the 300 and over minute deals the handset costs the same regardless of length of contract, with 24-month customers saving £5/month for agreeing to the longer contract but each paying the same for the actual phone.

However, the line of pricing runs only on the 24m line, implying that - following strict table rules - the deal is not available on the 18m contract at all.

O2 iPhone 4 price chart 3

There really should be a line dividing the 24m and 18m prices in the first part, like this:

O2 iPhone 4 price chart 4

(Strictly, the following prices should be vertically centred in the next boxes, but we’ll allow O2 some HTML leeway, there.)

This may be pedantic but with O2 causing confusion with the longer contract, more expensive handsets it really shouldn’t leave anything else up to question.

There’s been quite a bit of Twitter chat about O2’s confusing price list, and one commenter on Charles Arthur’s Guardian blog on the subject raises the interesting theory that shorter contracts are more profitable to the carrier given Apple’s iPhone annual rollout schedule.

“For most customers, a 24 month contract makes more sense - it ends at the same time as a new iPhone is released, so the carrier doesn't benefit from an early upgrade fee. To buy out 12 months of contract would be a bit silly for most people, who would buy direct from Apple (no money for O2) or skip a generation,” writes jkblacker .

“For the 18 month customer, the carrier knows that they will either buy out 6 months' worth of contract for a new phone after a year (win for the carrier), or get a new contract with a 6-month 'old' iPhone without having to give a discounted upgrade offer (win for the carrier).

“So, on these low tarrifs, which obviously don't make as much money for the carrier, I think getting customers to sign an 18-month deal makes more sense for the carrier.”

Confused? You will be...

Apple iPhone 4 review