iPhone 5 Will Drive Down Prices Of Previous iPhone Models

With the release of the iPhone 5, older Apple handsets will be made available at far lower prices. Apple is apparently planning to keep the two-year-old iPhone 3GS in its line-up, offering it for free with on a 2-year contract, or at an unsubsidised price of $399.

According to analyst Mike Abramsky, quoted by AppleInsider, at Apple's big iPhone event today we are likely to see a completely new iPhone (either named iPhone 5 or 4S) but not a new lower-end model that was rumoured to be meant for entry users.

[ed: You can read our extensive coverage of the iPhone 5 from the very beginning here. Follow Us Live From 18:00 UK time (10am local time) for the iPhone 5 event here.]

Instead, Apple will reduce the prices of existing models in order to appeal to larger less well-off markets. This strategy is particularly aimed at the huge Chinese prepaid wireless market.

Mike Abramsky predicts that the prices for the iPhone 4, released last year, will drop to $99 with a carrier contract and to $499 contract free. The iPhone 3GS, already on the market for 28 months, will be kept in the prepaid offers but it will be put forward for free with a carrier contract. The subsidised price for the iPhone 3GS has dropped from $99, in June last year after the release of iPhone 4 and again in January 2011, when it was offered at $49.

With the fifth generation iPhone and a lower price for existing models, Apple has heavy weapons in the war with Google and the legion of Android devices. So, if you wanted an iPhone 4 but couldn't afford it, now could be the right time!