O2 slashes 8GB iPhone to £169

O2 and Carphone Warehouse are to cut the price of the iPhone by £100

UK mobile firms O2 and Carphone Warehouse are to cut the price of Apple's iPhone by £100.

The 8GB iPhone will now cost £169, but the newer 16GB model will not receive a price cut.

O2 confirmed speculation that it would follow German carrier T-Mobile, which announced last week that it will drop the price for the 8GB iPhone to €99.

O2 has already reduced the cost of owning an iPhone by overhauling its tariff structure to allow users more voice minutes and text messages.

The news follows rumours of a possible 3G iPhone coming this summer. The cuts have added to speculation that suppliers are clearing out stock in anticipation of a new release.

Apple chief executive Steve Jobs said last year that the company is working on a 3G version of the iPhone scheduled for release in 2008.

At the time, Jobs listed battery life as the main hurdle facing the development of a 3G iPhone.

The price cuts have led some to suggest that iPhone sales are not meeting expectations.

Reports in The Financial Times earlier this year suggested that the iPhone was falling short of target numbers.