Pay As You Go iPhone 3G to launch September 16th, £350 upfront

O2 has announced it will sell the iPhone 3G with a pay-as-you-go option starting with September 16th. Allowing customers to use the device without subscribing to a long-term contract for the first time.

The prepay handset will be available from September 16, priced at an eye-watering £349.99 for the 8 gigabyte version and £399.99 for 16 gigabytes.

Although the initial outlay is steep, analysts say it will appeal to customers who want to stay in control of their spending, and those who make few phone calls.

O2 is offering customers unlimited data and Wi-Fi for the first 12 months, however the "excessive usage" policy will still apply, and cost £10 a month if you go over it.

Unfortunately O2 still has exclusivity on the iPhone deal, which means you'll have to use the O2 SIM card the PAYG phones will come with. If you want to keep your iPhone legal, that is.

Currently, at O2 rates, if you top up your phone with £10-£14 you'll receive 500 minutes, between £15-£29 will give you 1,000 minutes, and those who top up with more than £30 each month will have unlimited minutes.