iPhone will be £350 on prepay

O2 will price the 3G iPhone at £350 for the 8GB version, and £400 for 16GB, Mobile believes.

The pricing has been announced on O2's website and the prepay version will be available from the 16 September.

This price also includes unlimited browsing and Wi-Fi for the first 12 months. After 12 months you can continue to receive unlimited browsing and Wi-Fi for just £10 per month.

The operator is confident it has sufficient stock in place, and will not be looking to extend distribution beyond its own stores, Apple stores and Carphone Warehouse shops.

It is also believed that O2 is working on developing a system to minimise box breaking - The 16GB iPhone is currently available on eBay for around £500.

A new iPhone advertising campaign hints at the new price with the slogan: ‘You’ll love the new price.’