Apple is all set to unveil its new smartphone next week, and according to the rumor mill, it’s going to be quite the upgrade — larger display, thinner profile, and LTE compatibility are all on the menu.

In addition to the new handset, it’ll be interesting to see what Apple does with the rest of its iPhone lineup. A lot of folks think the 3GS is on the way out, but what about the other models?

According to a new report from The Telegraph, Apple will replace the current free-with-contract iPhone 3GS with its 8GB iPhone 4 model. And it will replace the 4, at the $99 price point, with an 8GB 4S.

“he new update will mean that the 8GB version of the iPhone 4 will be the entry-level iPhone, probably given away free on £20 per month contracts, as the 3GS is currently. Sources close to retailers also suggested that an 8GB version of the 4S could be introduced.”

In addition to the new 4S model, the publication’s sources have also confirmed that the iPhone 5 will come in the usual three storage options, and they echo the expected September 21st availability date.

It wouldn’t surprise us at all to see Apple drop the 3GS from its lineup this fall. The handset has been on the market since 2009, and its internals are finally starting to show their age with the iOS 6 update.

That being said, we also wouldn’t be shocked to see Apple release an 8GB version of its iPhone 4S and price it at $99. It did the same thing last year with the iPhone 4, and it continues to sell well.

We’ll find out if any of this holds water next Wednesday. Be sure to join us for full iPhone event coverage.