T-Mobile Germany has cut the price of Apple's iPhone to just €99, around £78.

The company's cheapest 8GB iPhone was priced at €399, but T-Mobile Germany has made the decision to subsidise the handset to boost sales. The price for the 16GB handset remains the same.

Buyers will still be tied into a T-Mobile price plan for the iPhone, which equates to €960 over the two-year contract.

A spokeswoman for O2, which has exclusive iPhone rights in the UK along with Carphone Warehouse, said that the company has no plans for similar subsidy.

However, O2 confirmed that it will monitor developments and will react to customer demand.