The £100 reduction is part of a limited offer until June 1 and comes after T-Mobile reduced the price of the handset from £315 to £78 in Germany.

The price cuts have boosted industry speculation that the 3G version of the device could be released later this quarter.

In the US, the iPhone initially appeared in two versions - 4GB and 8GB. In February, the company announced a 16GB version of the device for both the US and Europe.

When the iPhone made its debut in the US in June, more than 1.4m units were sold within 74 days.

The offer is available from today on all O2 iPhone tariffs.

O2 said that iPhone users are among its most satisfied customers and the deal aims to "bring its benefits to an even greater number of customers."

"The iPhone has also been hugely successful in attracting new high-value customers to O2 who are also more likely to recommend O2 to their friends and family. Sixty percent of iPhone customers are new to O2, while iPhone customers spend on average 30% more than other pay-monthly customers," the company said in a statement.