This deal has been up before, but it was expired after Dialaphone pulled the deal. Now the deal is back!
Basically, Dialaphone has a stock Samsung Galaxy S (that means totally unbranded and unlocked) on an 18 month O2 contract at £20 per month. Yes, the contract is crap (100 minutes, unlimited texts and no mention of data), but this deal is not about the contract. Use your own sim in the phone, or get a Simplicity sim, or even a giffgaff sim. If you go through Quidco or TCB, you'll get £35 cashback. You then downgrade the O2 contract after the 9th month (says you can on the O2 paperwork) to the £15 per month tariff. That way, you're only paying £280 for the phone over the course of the contract.
Click the link, then effective monthly cost on the table in the lower half of the page to see the £20pm x18m deal:
Total cost of the phone this way is:
9 x £20 = £180
9 x £15 = £135
TCB = -£35.00
= £280.00 spread over 18 months, interest free!
So basically, you can get this handset sim-free for £280, and just stick the O2 sim in a drawer. It works out cheaper than paying play.com £449 for it, or O2 £329, and this way you spread the cost over 18 months as well as paying less!
UPDATE 2: Deal no longer showing up when going though cashback sites. Not expiring, though, as £315 is still the cheapest you'll get this handset sim-free (still cheaper than the O2 PAYG deal, and this one comes with a contract and no up front costs).
O2 has confirmed that you can downgrade to the £15pm tariff at month 9.