Apple will launch an iPhone nano in the UK in time for Christmas, the Daily Mail has reported.

The paper states that the product will be launched in the UK at up to £150 for pay-as-you-go customers by O2, the official partner for Apple's mobile.

An unnamed industry source is quoted as saying "This will be a big one", presumably referring to its sales potential, rather than dimensions.

The new device is described as a "cut down version, with the candy bar shape of iPod nano music players".

One "expert" is said to have suggested the nano phone would have a touch wheel on the back and display on the front so that numbers would be dialled from behind.