I was planning to get a contract mobile and spoke to o2. They are offering iPhone 3g 8 GB on £29.38 plan for free. (Previously was £96.89). Also 16 GB is free on plan £34.26. (Previously £155.61).
The guy who spoke on the phone sounded very helpful. To get this offer, you should quote the coupon "APRSPECIAL" and insist that you are new to o2. I was fortunate to get this deal even without the coupon. Just bought a 16 Gb version.
Note, this is not refurbished phone. I got it double confirmed. Looks like they are clearing off the stocks for a newer model perhaps.