UK iPhone contract help

My daughter lives in the UK and she has a Samsung phone on a T-Mobile contract that I pay £25 monthly which finishes is Aug 2009.
It's her 21st Birthday in 2 weeks and she wants a iPhone, I am ok with getting her one I just woundered what would be the best way for me to go about this, should I get it on contract with O2 or should I get it on pay as you go??
I realalize that either way i will get f£$%ed but so be it, I want to get her the phone but not sure the best way about doing it as I live in Thailand and I am not up to speed with the UK phone system
Thanks in advance
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Hidden option c: Buy her the phone and tell her to pay for her own contract - she's 21!

I went with the £35 p.m contract which give me 500 texts and 600 mins. But had to pay £99 for the Iphone. This is an 18month contract.

The way I justified the £99 is the fact that an Ipod cost £107 anyway, and you get that with the Iphone.

I am unsure about the pay as you go costs for Internet browsing, but with the O2 contract you get unlimited web browsing which I guess probably amounts to a large amount of the monthly cost.

The pay as you go option will cost you £349 for the iphone I think and then the additional credit to use the phone, this topped with the web browsing could add up to a large amount - unless she uses wi-fi for browsing which would therefore be free...I think.

I would agree, yes you'r going to be ****** either way. But its just a matter of estimating whether her monthly usage of text/mins/browsing would make contract more appropriate, or if she is a low use user and could probably get by on PAYG. One of the benifits of PAYG is that costs may come down in the future and your not tied in to an 18 month contract.