You're welcome.
Having spoke to my friend he says he originally got it on ebay, but that it was initially an 02 phone and he was certainly using it with 02.
If this iPhone was sold in the UK when new, it was sold as carrier locked with O2. The ONLY country where the original iPhone was sold as officially unlocked was France.
If this iPhone was sold as carrier locked with O2 when new, you wouldn't be getting this error message. You would be able to activate the iPhone with your O2 SIM card and associated O2 line/number. The error message indicates this iPhone was hacked to be unlocked.
Restoring the iPhone on his computer will not change this or make any difference.
If the iPhone was hacked to be unlocked, you will need to re-hack the iPhone to unlock it. When restoring an iPhone with iTunes that was hacked to be unlocked, the process re-locks the iPhone to the designated carrier the iPhone was sold as carrier locked when new.