Apple sells the number one and number two most popular smartphones in the US, the iphone 4 and 3gs respectively.
https://www.macrumors.com/2011/08/22/iphone-4-and-3gs-rank-as-best-selling-u-s-smartphones/Making the "cheap" iphone a HUGE market and one that Apple will take very seriously. They are not going to produce the 3gs any longer, which makes the iphone 4 the obvious replacement for the, extremly popular, low end iphone. However, there are some issues with simply slapping a lower price on the current iphone 4. Of course there were the issues with the antenna and the white iphone, but also the cost of producing several different variations; cmda, gsm, white, black, 16gb, 32gb. They need to reduce the number of variations to reduce production costs and free up plant resources for the new iphone. The changes need to include: making the iphone 4 a world phone, two colors and available in, probably, one lower capacity (8 or 16gb), combined with making minor cost reducing improvements to the lines. This will free up resources and allow for minor spec bumps(A5) while reducing the production cost of the phone. Now that they have redesigned the iphone 4 into a cheaper world phone they need to identify it differently than the current iphone 4; hello iphone 4S. People are way more likely to buy the faster redesigned iphone 4S for $99 or $400 unsubsidized, then buy the current iphone 4 used from craigslist or ebay or where ever. Apple will then sell the the new iphone 5 with a 100% redesigned body and even better specs(A5, more ram, bigger screen, better camera, 64gb) for $199 or more, and they will maintain the number 1 and 2 spots easily. Just a guess...