Slightly long-winded, but bare with me.
O2 have a sim-only 12month contract @ £19.58 per month with 800mins as 1200 texts. (with free internet bolt-on)
Buy the Pay as you Go 3GS iphone for £440.
£100 cashback via Quidco for 12month O2 contracts.
=> 12 x 19.58 + 440 = 674.96
=> -£100 quidco = 574.96
Now, if you buy the iphone 3GS in store it costs £185
574-185 = 389.96
=> equivalent 12month line rental = 32.50
ie you pay less than the 18month £35/month contract per month for 12months!
Alternatively this can be seen from:
18 x 34.26 + 180 (total cost of iphone on normal 18month contract) = 796
574 for the above deal. diff is 222 or just over 6months of line rental!
First just want to say thanks to love2save who pointed this out in a post.
also, the only caveat is i didn't take quidco into account when buying the normal iphone 3gs on 18month contract.....