Next time U.K. shoppers drop into their local Tesco store for a loaf of bread, they’ll also be able to pick up an iPhone at the same time, courtesy of a new partnership with local carrier O2.

The deal, announced today, will bring Apple’s iPhone 3G and iPhone 3GS to more than 100 Tesco Phone Shops by the end of the year. Tesco Mobile is the retailer’s mobile virtual network operator, who will also offer the device online through its Tesco Direct site.

Tesco’s pay-as-you-go service may be branded Tesco Mobile, but it relies on the O2 network, similar to how MVNO Virgin Mobile operates using Sprint’s network here in America. Tesco is the world’s fourth-largest retailer, making the deal Apple’s next step toward even wider distribution in Europe.

It also marks a new advantage for partner O2, who lost their U.K. exclusive on the iPhone recently and now competes for customers with rivals Vodafone and Orange.