O2, which is the only iPhone network provider in the UK, has reduced the retail price of the standard iPhone unit by £100 in an effort to attract new customers. But a research firm believes sales of the iPhone have slowed down significantly in all the European markets, prompting the network carrier to decrease its price.

An O2 spokesman said the iPhone has been very successful and the price cut will surely further increase the figures. The offer will be available to all iPhone users irrespective of what price plan they choose.

The offer for the Apple 8GB model is for a limited period only until 1 June, and the price of the more advanced 16GB handset remains unchanged at £329.

But research firm CCS Insight said iPhone sales have slowed significantly in all the European markets where it is available and Apple will need to overcome it to reach its target of selling 10 million iPhones by the end of 2008.         

O2, which is the only network provider in the UK, sold only 190,000 in the first eight weeks – 10,000 short of the figures it predicted and its move to slash the price of the iPhone could be mistaken as a desperate move to achieve its sales target for the iPhone in UK?    

It was not the first time that O2 offered incentives to iPhone users. Early this year, the company announced it increased monthly allocation of minutes and texts from 200 to 500-600 (for those who signed a £35-a-month contract with O2) (read our story about it here).

Those on a £45 monthly tariff will have their minutes doubled to 600, while a new £75 tariff will replace the £55 monthly charge and give users 3,000 minutes and 500 texts. This move by O2 immediately illicited positive reactions from iPhone users who can now have more value for their monthly fees.

In Germany, T-Mobile also offers the 8G iPhone for only €99 (read story here).

The high price tag and restrictions on using the phone on just a single network is believed to have discouraged people from buying the touch-screen handset, which combines a phone with a digital music player and internet browser.