O2 is said to be "poised" to drop prices on the iPhone 3G, ahead of a new handset launch from Apple this summer.

News that's currently unconfirmed by O2, it's said the operator wants to clear stocks before the next, third-gen iPhone launches, rumoured for release in July.

Currently the iPhone 3G 8GB is available from free on £44.05 a month contracts while the 16GB iPhone is free only on a £73.41 a month contract.

Mobile reports that from May the iPhone 3G will be free on £35 a month contracts (or technically £34.26 tariffs due to the VAT cut) while it's suggested the 16GBer will go free on £45 tariffs.

There is no suggestion as yet that the pay as you go iPhone 3G - currently £342.33 - will see a reduction.

Last April O2 slashed £100 off the price of the first-gen iPhone prior to the 3G version's launch in the summer.

Mobile also suggests that the next-gen iPhone may also be available through Orange in the UK, signalling the end of O2's exclusive and a result of Apple's strong Orange partnerships in other countries.