I agree except for the price point. $400-$450 is waaaay too much.
There's not much point in taking the superb iPhone 5, cheapening it up like a cheap whore, and then selling it for only slightly less. It has to be significantly cheaper to drive sales.
I mean how do you sell that? "It looks bargain basement and it has lesser capabilities but it's (slightly) cheaper?" Why would anyone buy that? Also, the whole point is to get more people to walk into an Apple store and pick one up off-contract. The price has to be something that someone would go for off-contract, not something that would be slightly cheaper on-contract.
$299 or it isn't worth the trouble.
$200 if they can do it.
$299 is wishful thinking at best, and $200 is not going to happen.
How is an iPhone Lite supposed to come in under the price of an iPod Touch when a phone has far more complex silicon?
Adding cellular support to any iPad adds $130 to the price.
The cheapest iTouch is currently $229 sans rear camera. Add the camera and plastics and you probably end up with a $250 device. Add your cellular radio which we know is a $130 mark up and suddenly you have a $380 phone. And that's with recycled 4S guts. But now you need LTE capability because Apple would have to be on crack to launch a new non-LTE cellular device, and Apple doesn't make products for "Africa and India". That puts in the $400-450 range which is $200 less than an iPhone 5, and $100 less than a 4S, only get you get a larger 4" screen and LTE.
More importantly, with a cheaper and familiar model, it frees Apple to go balls to the wall with iPhone 6 and really pioneer new territory and technology.
Also, the cheaper model will just be "iPhone" and flagship models will be 5S, 6, 6S, 7, etc etc.