Is Apple's iPhone really a must-have this Christmas?

Is it a phone? Is it an MP3 player? Is it a web browser? And is it worth the money?

The sassy, sexy, all-singing, all-dancing iPhone is coming to a store near you, just in time for Christmas. With only a month to go before Apple's venture into the mobile-phone market hits the high street, savvy shoppers want to know if it is worth its hefty £269 price tag.

The iPhone, which goes on sale on 9 November, is three gadgets in one: a widescreen iPod with touch controls; a revolutionary internet device with browser and e-mail, and, of course, a mobile phone.

The problem is that the bill doesn't stop with the price you pay for the phone in the shop; to use the iPhone as a mobile rather than as a fancy music player and internet browser, you will need a mobile phone contract.

The phone network concession has been awarded exclusively to O2, and on top of the price of the phone you will need to sign up for an 18-month deal costing a not-so-cheap minimum of £35 for just 200 minutes a month. Compulsive chatterers can opt to pay even more – £45 or £55 per month, depending on how many more inclusive minutes they want, and the number of music downloads included. The deal does, however, offer unlimited data transfer (subject to reasonable use) and free Wi-Fi access to more than 7,000 hotspots around the UK.

And, if keeping your existing number is important, you can port it to your new contract, whether you are already on O2 or with another provider.

Stockists of the iPhone will be Apple, O2 and Carphone Warehouse stores, as well as their online equivalents.

It's worth noting that the iPhone does not support 3G, but uses Edge (Enhanced Data rates for GSM Evolution), otherwise known as 2.75G, for data transfer when Wi-Fi is not available. The reason for this, apparently, is that the superior 3G drains the battery too rapidly. Apple is working on the problem.

There is no doubt that the phone is the ultimate gadget. More than a million have been sold in the US since the phone was launched on 29 July.

Professor Nigel Linge, the director of the Centre for Networking and Telecommunications Research at the University of Salford, is on record as saying that the mobile phone as we know it – a device simply for talking to someone else – will have died out within five years, and that the future is mobile computing. He calls the iPhone "a remarkable piece of technology. The iPhone is the most complete integration to be developed so far of a phone, a camera, internet browser with Wi-Fi, Bluetooth, an MP3 player and video playback all in one easy-to-use interface," he says.

The downside is that while the iPhone gives you all the features in one convenient device, if you lose it or it goes wrong and needs repair, you have lost all the features too, simultaneously.

Chris Frost, the mobile phones spokesperson at the price comparison service uSwitch.com, says: "Given the fast pace of change in handset technology, it's good news that contracts will be 18 months long and not the widely predicted 24-month minimum term. All three tariffs also include unlimited mobile data usage and access to more than 7,000 Wi-Fi hotspots, so customers can browse the internet and access e-mail on the move without worrying about additional charges being added to their bill." However, he warned that the new gadget was "not all a bed of roses."

"As with the iPhone launched in the US earlier this year, the handset does not feature 3G, meaning that customers will only be able to experience web browsing to the full when they are connected to a Wi-Fi network. Secondly, the 8GB of memory is only half that of the-top-of-the-range iPod Touch – the 'iPhone without the phone' – that, for the same cost of £269, features 16GB of memory, features Wi-Fi web browsing and doesn't tie you into a £35 month contract for 18 months."

Geoff Blaber, senior analyst at telecoms and IT intelligence consultancy CCS Insight, says that the strength of the Apple brand puts the phone in an exceptionally strong position to dominate the phone market, although the launch of the iPod Touch, which can cost as little at £199 for the 8GB version – which has half the memory of the top-of-the-range 16GB version - could undermine it.

So is the iPhone a good deal? Undoubtedly not, if price is the main consideration.

And already, rival manufacturers are trying to muscle in on the "object of desire" section of the market.

Later this month, the South Korean firm LG - famous for its Chocolate and Prada phones - launches the £300 Viewty in the UK; while the Nokia N95 has been around since early this year.

Frost adds: "The tariffs offered with the iPhone are not the most competitive in terms of inclusive minutes and texts. For £35 a month customers will receive 200 minutes and 200 texts – of far less value than O2's usual tariffs, such as the Online Texter 35 that provides 600 minutes and 1,000 texts for the same price.

"The iPhone is a groundbreaking device that will undoubtedly be very popular with iPod fans everywhere. However, while customers may decide to hold off for the inevitable 3G version, others may consider the relative benefits of buying an iPod Touch music player alongside a better-value mobile phone contract."