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O2 drops iPhone price, takes two years of your life

O2 has dropped the price of the iPhone, with the handset now being given away free on lower tariffs. There's a catch, though

Free iPhones! Getcher free iPhones! O2 is now giving iPhones away free on certain tariffs, if you're willing to sign away two years of your life.

From 3 April you'l be able to get an 8GB iPhone 3G on the £34.26 monthly tariff without paying extra for the handset. That's right, for a mere thirty-five quid a month you too can be as cool as those other iPhone owners you've seen on the train.

There's a catch, though -- there's always a catch -- as you have to sign up to a two-year contract, up from the 18-month contracts previously imposed. That's a total of £822 across two years. If you're not willing to sign up for the two years, you can stick with the existing 18-month contracts but you'll have to pay £96 or £155 for the 8GB or 16GB handsets.

For your money, you get 600 minutes talky-chat and 500 texty-messages each month. On the £44 contract you can also get a free 16GB iPhone 3G handset, which previously cost just shy of a ton on the £34.26 monthly contract and £58 on the £44.05 monthly contract. You can buy an iPhone from O2 or through Carphone Warehouse.

Alright, let's don our thinking caps and do some maths. Presently, getting an iPhone for free on a higher tariff works out cheaper in the long run than starting on the lower tariff and paying for your handset, thanks to a loophole that lets you drop to a lower tariff halfway through your contract term. Clear? We've contacted O2 to check whether this will still be the case.

Snap up your iPhone now, just in time for the move to software 3.0. Hey, there'll only be a new one along any bloody minute.

Update: We've spoken to O2, and you can still change tariffs after nine months, but the availability of free handsets seems to have closed the loophole. If you do sign on the £44 tariff for 24 months, you can get yourself a free 16GB iPhone and with a switch down to the £34 tariff after nine months you'll pay a total of £910.35. Paying for the handset and signing up for the cheaper tariff will set you back just £879.98 in total. Right, we're going to stop doing maths now, our heads are hurty.