The Daily Mail (of London) is citing "an industry source" that says Apple will release a £150 (≈$295) "iPhone nano" for O2 pay-as-you-go customers.
The 8GB iPhone 3G is currently on offer for £99 (≈$195), but requires a £30 (≈$59) per month service charge for 18 months.
In the article, the Daily Mail cites an "expert" who says the iPhone nano will include a touch wheel on the back of the handset so numbers can be "dialed" from behind. As much as I love my rotary-dial telephone, not just no, but heck no.
In fact, the seven-sentence, poorly-cited Mail story is little more than linkbait, which is why we're not linking directly to it. The newspaper, from what I understand, is something of a rag in the UK. TechCrunch UK noted that the Mail is going after pageviews, and the crowd that follows Apple rumors would be good for some hits. Shrewd, but crude.