Especially if the possibly mythical phone is, as The Register's Rik Myslewski argues, a lower end model than the 3GS or its upcoming successor. He cites a different set of rumors and sources, pointing to a dual-mode CDMA/UMTS iPhone, but a scaled-down version more suited to emerging economies.
The current model has struggled to achieve major presence in markets like India where average disposable income is low and subsidies/contracts are almost unheard-of. A cheaper iPhone might also be more effective at fighting off the numerous clones and counterfeits.
As Myslewski says: “It's unlikely that Verzion would want to settle for the second class model. But China Telecom might. After all, iPhone sales are now growing by leaps and bounds in that country, and its market is certainly large enough to support both a top drawer and an entry level iPhone.” The fact that Apple has chosen a different manufacturer, rather than the current iPhone partner Foxconn, also suggests this new model, if it exists, is a significantly different variation, rather than just the same iPhone with a CDMA radio added.