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iPhone 4 Rival Alert : Sony Ericsson Xperia Arc S From £208

The fact that O2 allows you to downgrade after 12 months and even dump your data allowance in order to reduce contract prices, is a boon for those looking for an affordable handset that can be used on other networks.

The Sony Erisson Xperia Arc S white, for example, costs £21.50 on O2 with 100 minutes, 500 texts, 500MB data and unlimited Wi-Fi access.

However, buying it from Dialaphone means that you get £110 cashback automatically, dumping the data allowance from day one means that you also save £6 per month. In addition, O2 allows users to drop down a notch in their contracts after 12 months, saving another £5.

So while the suggested cost of the contract is £516, the various discounts enable you to drop it to £208 without any third party cashback offers.

The white Xperia Arc S is Sony Ericsson's top of the range handset; it is only a few months old and comes with a Qualcomm Snapdragon SoC clocked at 1.2GHz, 512MB RAM, 8GB onboard storage, a microSD card slot, a big 4.3-inch 854x480 pixel screen, Android 2.3 Gingerbread, a super thin chassis and a five megapixel camera with pseudo-3D capabilities.