Last week, numerous rumours began to surface that O2 would be slashing the cost of the iPhone due to the launch in the summer of an anticipated new model from makers Apple, which many are thinking could be an ‘iPhone Nano’.

Mobile Today reported that O2 would be making the iPhone free for £35 and £45-a-month customers, leading many to decide to hold back from purchasing a phone just yet to see if the rumours were true.

O2 was quick to respond to the rumours by announcing some changes to its price plans. Starting on April 3rd, O2 will be offering the iPhone free to customers taking out a 24-month contract.

At the moment, before the changes go through, the 16GB phone is free to customers paying £75 a month, and the 8GB version is free to customers paying £45 a month.

Under the new contracts, the 16GB iPhone will now be available for free to £44.05-a-month customers, whilst £34.25-a-month customers will have to pay £57.74 for it, as long as they are on a 24-month contract. The 8GM version will now be free.

O2 have said this new deal is for customers “looking for added value in return for added commitment”. And although it is still a lot to pay over two years, it does at least make it more affordable for fans who have so far not been able to get their hands on the iPhone.

Following this news, Apple also announced iPhone OS 3.0, a huge host of features that were currently missing from the iPhone that will now be available for free for iPhone owners in the summer. They include cut, copy and paste, as well as MMS and the 'shake to shuffle' feature.

But as for news of whether a new iPhone model really is on its way, we’ll just have to wait.