select all the midpoints on the vertical edges and hit ctrl+f. those midpoints are now verticies. I've just realised that might not actually work entirely correctly.
*checks*
Blast, it wont let you use a midpoint and a non-mid point to create a split. (since you have to create new veriticies in pairs of midpoints)
*checks something else*
However. you can create a split by selecting one face's midpoints, then the adjacent-but-one face's points, so the splits altternate.
Then repeat this alternating split effect on the nonsplit faces (but they've now got two mid points along their length due to the other split faces. just pick either both the upper ones or both the lower ones, its easy to tell midpoints cause they're yellow) and then simply move them up or down on the grid so they line up perfectly with the first lot of splits. it will ask you to merge them, definitely say yes.
if you've done it right should look like this:
Now you can just vertex manipulate the top points into a smaller ring as well as repeating the process for either of the new ring of midpoints.