I just upgraded my existing O2 contract over the phone and the customer services guy offered me free reboxed iphone 3GS 16GB for £32.26/month on 18 months contract. It includes 600 mins + 500 texts + unlimited internet and wi-fi.
O2 do exactly the same tariff normally for £34.26/month (£2 more) and charges £184.98 for the 16GB iphone 3GS.
The total savings in the span of 18 months works out as £184.98 + (£2 X 18) = £220.98. To me, its a nice O2 loyalty reward.
The guy defined reboxed iphone as very similar to new. Basically its a returned product from customers who sent it back within 14 days. O2 then changes the front and back cover of the phone and re-installs the entire software and puts it into brand new packaging.
He also offered me 32GB iphone 3GS version for free on £34.26/month tariff.