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O2 finally wins UK Apple iPhone contract

T-Mobile & Orange deals also set to be announced

O2 has finally won the contract to supply Apple's iPhone in the UK, according to the Financial Times, which also reported exclusive iPhone partner deals in Germany and France.

According to the FT, T-Mobile will sell the iPhone in Germany, while Orange will offer it in France. Apple's reported deal with O2 would bring an end to a period of intense negotiations, with the two companies first rumoured to have struck a deal at the beginning of July.

The operators have agreed to give Apple 10 percent of the revenue they generate from the sale of voice and data services for the device, according to the report, which cited unnamed sources. The operators hope to introduce the phone in time for the important Christmas shopping season.

Apple plans to announce the deal officially at the IFA international consumer electronics exhibition in Berlin next week, the Financial Times reported.

The iPhone first launched in June in the US through an exclusive partnership with AT&T. Initial reviews were positive (see our iPhone review), except for concerns about AT&T's slow EDGE (Enhanced Data for GSM Evolution) data network, and the fact that the iPhone's battery can only be replaced by returning the device to Apple. There were also activation problems during the first weekend, when thousands of customers tried to start up their phones at the same time and overwhelmed AT&T's servers.

Since then, speculation had been rife about who Apple would partner with in Europe. Most initial reports agreed that T-Mobile and O2 would be among the partners. Some reports, citing unnamed sources, said that Vodafone, Europe's biggest mobile operator, had been outbid by rivals in eleventh-hour talks.

Europe's splintered telecommunications market makes it harder for Apple to launch the iPhone here than in the US. None of the big carriers cover all of Europe's most populated markets, forcing Apple to strike deals with several operators.

The iPhone could provide a boost for operators in Europe, where customers tend to choose service based on coverage and where brand loyalty is not very strong, Niek van Veen, an associate analyst at Forrester Research, said.

It may also help them to secure longer term contracts with customers, who tend to favour prepaid calling plans in Europe over long-term subscriptions. That same factor could also work against the iPhone in Europe, however. Apple and AT&T require customers to sign up for a two-year contract for the device, an unusually long period.

Apple's steep demands may have made it harder for the company to reach agreements, van Veen said.

AT&T reportedly is also sharing a portion of the revenue from the iPhone. It's a new business model that Europe's operators may be reluctant to swallow, van Veen said.

"It's more than just a question of reach and what Apple wants, it's how much operators are willing to sacrifice their current [business] model for this phone," he said.

The contracts with T-Mobile, Orange and O2 were signed in recent days, according to the Financial Times. The top executives of T-Mobile and O2 campaigned for personal talks with Apple CEO Steve Jobs, the paper said.

The story appeared first in the Financial Times Deutschland (in German), and was reported later in English in the UK Financial Times.

(James Niccolai in Paris contributed to this report.)


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