Apple Insider reports that an analyst has said Apple will continue to sell its third-generation handset after the "iPhone 5" is announced, offering it for free with a service contract or for $399 unsubsidized.

Ahead of Tuesday's iPhone event, analyst Mike Abramsky with RBC Capital Markets said he expects Apple to introduce a refreshed iPhone this week, likely to be branded either "iPhone 5" or "iPhone 4S." He doesn't expect Apple to introduce a second, cheaper iPhone model, but instead reduce the prices of its existing lineup.

To that end, he sees the iPhone 4 dropping to $99 subsidized, and $499 without a service contract. But he also believes Apple will retain the iPhone 3GS in its lineup, offering it for free with a two-year carrier agreement, or $399 contract-free.

  Apple seen selling iPhone 3GS free with subsidy, $399 without contract