Apple iPhone users will be able to break their existing O2 contract with no penalty if they want to upgrade and get the new 3G model.

The contract tariffs and prices for Apple’s latest incarnation of the iPhone, which will go on sale on 11 July, have been released by O2; Pay As You Go customers will have to wait a little longer as prices have still to be set. Current iPhone users interested in the early upgrade will have to register on O2's site.

The 3G connection will be roughly 2.8 times as fast as the Edge wireless connection on the original iPhone. The company also implied that the new iPhone would run faster than other 3G handsets, claiming that it outperformed the Nokia N95 and Treo 750 by some 36 per cent.

It has built-in GPS for expanded location-based mobile services and the iPhone 2.0 software includes support for Microsoft Exchange Activesync. Third-party applications already available in the recently released iPhone software development kit will also run on the 3G model.

The 8GB phone comes with 75 minutes of talk time and 125 free texts, and will cost £99 on a new £30 per month tariff; the existing £35 per month tariff comes with 600 minutes and 500 texts. Consumers choosing either the £45 or £75 per month tariffs will get the 8GB iPhone 3G free with 1,200 minutes and 500 texts, or 3,000 minutes and 500 texts respectively.

The 16GB iPhone 3G will cost £159 on the £30 and £35 tariffs, £59 on the £45 tariff and it will be free on the £75 tariff. All customers will continue to receive unlimited data browsing over O2’s HSDPA network. There is also unlimited access to 9,500 Wifi hotspots through both The Cloud and now BT Openzone.

Both the 8GB and 16GB iPhone 3G will also be available for O2 Pay & Go customers with pricing to be confirmed in the coming weeks.

iPhone 3G will be available in the UK through O2, The Carphone Warehouse and Apple's retail and online stores.