Owners of iPhone 3G phones, or older mobile phones, may be in for a shock when they try to upgrade to the latest iPhone 3G S model announced by Apple yesterday.

The contract they have with O2 is for their current phone, and unlike last year's move from the iPhone to the iPhone 3G, there is no free upgrade.

Instead iPhone owners will need to pay O2 to end their contract early. Macworld understands that the price users will have to pay will, in most cases, be the full amount outstanding on any remaining contract.

iPhone 3G S Voice Control Consequently, the amount each person will have to pay will depend on the length of contract remaining, and the amount that person pays each month. For example, a person who purchased an iPhone 3G on launch day in June 2008, and took out an 18 month contract at £35 per month, will have 6 months remaining. They will need to pay 6 * £35 (or £210) to end their contract with O2.

Sarah Taylor, PR Manager at O2 told us: "many customers will have to pay the full amount outstanding on their contract, but not all customers will have to. Some may get a reduced amount."

It is our understanding that only "high value" customers will get a discount. These will most likely be customers on business or enterprise tariffs rather than individual owners.

iPhone owners will need to call O2 customer services to get an accurate quote of the full amount they need to pay to purchase a new iPhone 3G S.

Once the current contract has been settled with O2, customers will need to take out a new contract for the iPhone 3G S. As with the iPhone these come in 18 or 24 month varieties, with the phone costing between £87.11 and £184.98 depending on the contract length and monthly tariff.

Here is an image that O2 has provided detailing the new contract tariff lengths and amounts.

O2's guide to UK iPhone prices

Alternatively, users can pay to end their contract and buy a Pay & Go iPhone 3G S. Although Apple hasn't announced the pricing for the iPhone 3G Pay & Go, O2 is listing these amounts:

iPhone 3G S 16GB - £440.40
iPhone 3G S 32GB - £538.30

Note that a Pay & Go iPhone is not the same as an unlocked iPhone. Users will still be fixed to the O2 network. O2's Pay & Go deal includes 12 months unlimited data access (£10 per month thereafter). Calls costs 5p per minute, and texts are 10p each.

The O2 website seems to suggest that most users stick with the model of iPhone they currently have. On the O2 store, in answer to the question "already have an iPhone?" O2 suggests: "From 17 June download the new iPhone OS 3.0 software and you'll get over 100 new features for your iPhone."

Reaction from Macworld's readers has been understandably mixed. One reader called quantise said "There will always be a problem here until the release cycle of the iPhone (every 12 months) and the contract cycle (min 18 months) are disparate."

Another reader, called Adam sided with O2, saying: "You know that £99 you paid for the iPhone 3G? Do you think that's what the iPhone 3G costs? It's a subsidised phone! That's why you can't just escape from your contract as and when you want to, you're still paying off the handset."

Some readers were less unerstanding though. A poster going by the name of crazytrain said: "If O2 aren't sensible about upgrading then there will be many people (myself included) who will just wait for next year's version. If I'm not eligible to upgrade for another six months, there is no way I'm going to sign another 18 month contract. Apple is going to miss out on a huge number of sales/upgrades if this issue isn't sorted".

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