According to Deutsch Bank analyst Chris Whitmore, Apple is indeed planning to release two iPhone models this year, both a redesigned iPhone 5 and a cheaper yet revamped iPhone 4S that he describes as being like an iPod Touch with cellular technology.
Whitmore spells out the usual iPhone 5 rumors of a larger screen, better camera, and unibody enclosure, but takes more interest in the iPhone 4S, which he thinks will cost less than $150 to make, and may be available for between $300 and $350 with no contract. This would help Apple to address the midrange smartphone market more effectively, as well as provide consumers an affordable new way to use the iPhone as a prepaid device, which could help them tab a market of 1 billion users of prepaid devices.
The analyst describes the iPhone 4S as similar to an 8GB iPod touch with cellular technology and 3G data, and its lower price tag could help Apple significantly extend their iPhone profits. This may cast an interesting light on prior rumors suggesting a possible 3G iPod touch.