Iphone 3gs displays no service and cannot activate

Question

I cannot afford a smartphone, so my friend has given me his old iPhone 3GS when he upgraded to a newer model.
the phone has obviously been wiped so that it's as if it just came out the factory.
I enter the language, WiFi network info, etc. have also tried multiple WiFi hotspots, including my home Netgear/AOL, parents Huawei/TalkTalk and a pub's technicolor/plusnet.
whenever i try to activate it, the top bar says "Searching..." and then eventually "no service", and i get a message saying the activation server is unavailable, and have tried again and again to no avail. have tried powering off, removing and re-inserting the SIM, then powering up - same errors. the SIM pins appear all present and not broken/bent etc when I look into the device.
All I can say about the make/model is that it's an iPhone A1303, so it's a 3GS (Identify your iPhone model - Apple Support) . 16GB capacity.
I have no way of knowing the iOS version, IMEI or baseband revision (unless there's a mac/iTunes way of getting it?)
my friend is certain that he has never jailbroken the device, and that it has always been on O2 (the same network as me).
my SIM works in my old Nokia, receives texts/calls etc. my Nokia gets all 4 bars of signal.
I have also been in to visit an O2 shop, and had my tariff upgraded to one for a smartphone. They're certain it's not an O2 problem. I've probably had this SIM at least 8 years.
Have tried activating it by itself, and via iTunes 10.6.3(25) on Mac 10.6.8. iTunes says there is no SIM installed.
is the phone somehow blocked? how would i find out if it was? is it possible that it has been hacked to support O2 instead of another network (by a shop) - and that by scrubbing the data, it has wiped out the hack (in which case, how do i get the phone's ios/baseband/IMEI/original network)? is this a really silly thing like having to deactivate my old phone or having to register the iPhone with O2? is this a problem with the SIM, the phone hardware, the firmware or iOS? what if i got his old SIM - would that activate the phone, and is the phone just not accepting a different SIM than the original one?

Answer 1

Here's what you do
1.Make sure your phone is not plugged into the computer.
2. Put the iPhone into recovery mode (this is NOT DFU mode). Do this by
     a). Hold down both the power/sleep button and the home button until the screen turns black/off
     b). As soon as this happens release the power button but NOT the home button
     c). If done correctly then the Apple logo will appear, KEEP HOLDING THE HOME BUTTON and eventually a connect to itunes graphic will appear. You can release the home button
3. With the connect to itunes graphic on the screen, plug your phone into the computer. iTunes will start up if it is not already on, and then will say the phone needs restoring. Ignore this and COMPLETELY quit iTunes.
4. With iTunes off and the graphic still on the phone screen, hold down both the power/sleep and the home button again for 9 seconds (count 100, 200, 300...) or until the screen goes black
5. When the screen goes black release the home button straight away.
6. It will start up with the iPhone activation screen ignore this. iTunes should have started up, if not do so. Go to the iPhone tab and either resotre from backup or set up as a new phone.
You're welcome