There are reasons:
- Apple is more concerned about single handed use than turning their phones into phablets as stated in their keynote
- we don't know much actual stuff about the 7.85" iPad Mini. However it MIGHT have 768p resolution just like the iPad 2. Apps will most likely look okay in that resolution despite the smaller screen size.
No offense, but I hate that response, calling a little larger phone a Tablet

Yes phones like the Galaxy Note II @ 5.5" is too large, and that is a Phablet.
To me, the perfect phone size was the Galaxy S2 and EVO 4G @ 4.3", that is only .3" bigger than the iPhone5, but it's both a little taller and a little wider, I even like 4.5" which the U.S. Galaxy S2's were made. I think the 4.3" - 4.5" size is just right. And Apple could easily make an iPhone at that size, and NO that is not a Phablet.
My Wife has the HTC One @ 4.7", and that is getting to the too large size for easy one handed operation. I think the Galaxy S3 @ 4.8" is also on the large size, and hard to one hand it. I have the Galaxy Nexus @ 4.65", and that is border line almost just right the size, but also, just a tad too large.
So yeah, for me 4.3" - 4.5" is perfect for a phone, just my opinion. iPhone5 @ 4" too small, and Galaxy S3 @ 4.8" too large, right in the middle is perfect.
Only way I would get the iPhone5, is once the Jailbreak is out, I love my Widgets and customization. So whenever the i5 is jailbreaked, I might consider it, but by then, I might already own the new Nexus phone, due next month.