Vodafone has announced that it will be offering the iPhone 4 on a PAYG basis.

Vodafone will be selling the 16GB model for £480 and the 32GB for £570. These handsets would be locked to Vodafone so you're looking at a saving of just £19-£29 if you were to buy one directly from Apple, which would be SIM-free.

So, why would you bother to buy a locked phone when for not much more you could get an unlocked one?

Well, Vodafone is hoping to tempt users with an offer of 12 months free data. Until November 2010, anyone who buys a Vodafone iPhone 4 on PAYG will get 250MB a month of 3G data and 1GB a month of Wi-Fi from BT Openzone.

"Customers asked us to make the iPhone 4 available on pay as you go, offering them a variety of ways to pay for their mobile internet access", said Mark Bond, consumer director at Vodafone UK. 

"We’ll bring in additional options later in the year which will allow even greater flexibility."

Call costs on Vodafone PAYG are 20p per minute and text costs 10p.

So, if you're tempted by Vodafone's offer then Pocket-lint would advise you to have a check to see how much you're likely to spend based on your previous bills - it might be cheaper to look at O2, Orange or Three's SIM-only plans and buy direct from Apple.

Update: We've spoken to Vodafone and confirmed that there is no minimum top-up or anything like that - in fact you don't even need to have any credit to make use of the data allowances.

Also, after a year, you will also be able to unlock your iPhone 4 to use it on other networks.