AT&T Inc yielded on Wednesday to customer complaints and agreed to extend its best upgrade price to previous iPhone buyers eager to get their hands on Apple Inc's new model, which goes on sale Friday.

The telephone service provider said it would allow iPhone users who are upgrade eligible in July, August or September to buy the new device for as little as $199. Previously, the price would have been $399.

The change means that many customers who bought the current iPhone 3G model when it went on sale last July are now eligible to buy the newest model, the 3G S, at the lower price.

AT&T, the exclusive U.S. carrier of the iPhone, said that, in general, a customer who pays at least $99 a month for wireless service is eligible for a subsidized upgraded device in 12 to 18 months.

(Reporting by Gabriel Madway; Editing by Tim Dobbyn)