AT&T said Tuesday that the latest version of Apple's iPhone will go on sale July 11 and that the company will eventually let customers buy the handset without signing an annual contract.

 New or current AT&T customers who are eligible for an upgrade would be able to buy an iPhone for $199 to $299 with a two-year contract, as the company previously announced. An activation fee ranging from $18 to $36 would apply.

"In the future," AT&T said, it would sell the iPhone without a service contract, though customers would pay a much steeper price: $599 for the 8-gigabyte version and $699 for the 16-gigabyte model.

AT&T did not specify when that option would become available.

Monthly plans have been priced at $70 at the low end and $130 at the high end, not including text messaging. That service would cost an additional $5 a month, for up to 200 messages, to $20 a month, for an unlimited number of messages.

AT&T and Apple unveiled the updated iPhone earlier this month. The second-edition handset will work on AT&T's faster wireless network, unlike the slower original model, which went on sale last summer and ran on its Edge network.

By cutting the price of the iPhone in half, AT&T hopes to drum up sales and wrest more customers from rivals such as Verizon Wireless and Sprint Nextel.

The heavier subsidies, however, could cost AT&T up to $1 billion alone in 2008, though executives believe the company will compensate by signing up more customers. AT&T has also raised the price of monthly plans for the iPhone.

AT&T is the sole U.S. distributor of the iPhone under a multiyear deal with Apple. The snazzy touch-screen device has spawned a host of copycat phones from rival handset makers seeking to capitalize on the popularity of the iPhone and mitigate AT&T's advantage.

Yet a slowdown in the U.S. economy appears to have spurred consumers to delay purchases of new phones, especially high-end models. It remains to be seen whether the newer iPhone can buck that trend.

Source:Dow Jones Newswires