It wont work!!!

Hello everyone.

I have an iPhone 3…ancient old thing that none of the apps will work on anymore. A friend has just got himself a new iPhone 5 so has given me his old iPhone 4 after he had it unlocked. I got a new micro sim for it which arrived today. Got in touch with my phone company and asked them what to do to swap over to the new sim on the new phone. My old phone was duly terminated and the new sim was meant to be up and running.

I plugged the new phone in to my Macbook Pro to sync the phone.
Now, after the laptop telling me all was done, the phone says hello and asks me to slide to set up, I choose my network then I reach the page that says Set Up iPhone and then it asks if I want to set it up as a new iPhone or to restore either from iCloud or from iTunes, I ask it to to restore from iTunes……..then it asks me to connect to iTunes again!!! No matter how often I connect it to the laptop it always comes back to this connect to iTunes page.

I even restored the phone to factory settings and at sometime during that process it confirmed that the phone was unlocked.

Anyone got any ideas of where I am going wrong?

I now have two iPhones, neither of which work.

Any help would be very much appreciated.