If the iPhone 3G PAYG is £500 in the UK and you buy it. Then your bloody crazy. It be much cheaper to get a contract with the phone.

Minimum contract is 18 months and minimum monthly bill is 30
18 x 30 = 540
+ 100 for the phone = £640
So if you'd top up at least £140, you masewell get it on contract.
(That is assuming it is £500, which it WON'T be)
It is coming to PAYG, it's been confirmed on the O2 website.
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