iPhone Dev Team has already released UltraSn0w 1.2 to unlock iOS 4.2.1 on iPhone 3G, 3GS using Reds0w and Ultrasn0w.Here is the step by step guideline to unlock iOS 4.2.1 on iPhone 3G, 3GS.The iPhone Dev Team are currently unable to unlock baseband 05.14.02 on iPhone 3GS/3G but fortunately found a working exploit for baseband 06.15.00 (a higher version bb found on iPad 3.2.2). Which means that if you want to unlock any of the basebands from 05.14.02 and higher, then you have to first upgrade to baseband 06.15.00 and then unlock with Ultrasn0w 1.2.
If you haven’t done so, then go ahead and update your baseband to 06.15.00. Only then Ultrasn0w 1.2 will be able to unlock your iPhone.
After upgrading your baseband as mentioned above, continue with the following steps to unlock iPhone 3GS or 3G on basebands 04.26.08, 05.11.07, 05.21.01, 05.13.04 and 06.15.00. As you may have noticed baseband 05.14.02 is not included in this list because it is not unlockable by Ultrasn0w 1.2.
Step 1: Launch Cydia and go to the ‘Manage’ tab.
Step 2: Tap ‘Sources’.
Step 3: Tap ‘Edit’ at top right and then ‘Add’ at top left.
Step 4: Enter ‘http://repo666.ultrasn0w.com‘ and tap ‘Add Source’.
Step 5: After Cydia downloads the packages and completes updation of it’s sources, search for ‘Ultrasn0w’.
Step 6: Install Ultrasn0w 1.2.
Now restart your iPhone.you should be able to use any SIM (unofficial carrier also).
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