Apple (NSDQ: AAPL) will release a Nano version of the iPhone in time for Christmas, according the Mail on Sunday, citing an “industry source.” The new product “will be a big one,” the source is quoted as saying, who notes that while the 3G iPhone has been one of the fastest selling in the UK, it’s too expensive for the PAYG market. “A cut down version, with the candy bar shape of iPod nano music players, would be a huge hit as a Christmas gift,” the source noted. It supposedly will be priced at up to £150 ($300) for pay-as-you-go customers of Telefonica’s O2, which holds the exclusive rights to sell Apple’s iPhone in the UK. The Guardian, however, thinks the story is just a PR stunt by O2 flaks to keep the iPhone in the papers.