My guess is that this budget iphone is probably a reskinned iphone 4s. A5 chip, 3G, with the fatter form factor to fit in the antennae that aren't "outsourced" to the sides of the iphone any longer.
Why not just resell excess 4s stock in other countries? It is possible that while the iphone remains highly desired, consumers may have qualms about buying a 2-year old phone model. This budget iphone would effectively allow Apple to remarket the 4s as a brand new model in these countries that want an iphone, can't afford the high-end model, and dread getting an older model.
All valid points.
To imagine pricing for a new iPhone you have to look at current pricing. The base 16GB model is $649. I doubt that will change. It will get better specs and probably the base model will move to 32GB but I am confident that $649 price will stick.
That means the most likely price for a cheaper iPhone which would replace the 4/4S/5 models would very likely be a base model with a $449 price.
32GB $199 on contract $649 unsubsidized
64GB $299 on contract $749 unsubsidized
128GB $399 on contract $849 unsubsidized
16GB free on contract $449 unsubsidized
32GB $99 on contract $549 unsubsidized
Probably a repackaged iPhone 4S with 4" Retina, LTE, unibody polycarbonate, and lightning port.
Apple could probably sell that for $400 off contract and recycle that design for the next few years with marginal updates. Throw in a selection of iPod touch like colors and you've got the perfect hook for a budget iPhone that is more palatable to emerging markets and budget minded consumers.
More importantly, it frees up Apple to go balls out on the iPhone 6 without worrying about coddling "legacy" iPhone lovers with an aversion to change.