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O2 Yet to Get First Bite at U.K. Apple Deal

Spanish-owned mobile phone operator O2 has yet to sign any deal to bring iPhone mobile phones -- Apple's latest "must-have" gadget -- to Britain.

O2, which is owned by Madrid-based Telefonica , on Thursday declined to be drawn on newspaper reports that the company was poised to clinch the first European iPhone deal with Apple , the innovative U.S. consumer electronics group.

"We have not signed a deal with Apple," a spokesman said.

But the reports, some of which tipped France Telecom's Orange as close to securing a similar deal in France and which followed a German newspaper article on Wednesday that Deutsche Telekom's T-Mobile was set to win a German contract, weighed on European market leader Vodafone's shares.

Shares in Vodafone Group , which jumped last week partly on hopes the group would secure an exclusive, pan-European iPhone deal, slipped by more than 1%. Telefonica, Deutsche Telekom and France Telecom traded broadly flat in a weaker European telecoms market.

Some analysts noted that Apple, whose iPhones combine its hugely popular iPod digital music player, a video player and Web browser, looked set to mimic the three-country strategy it used to launch its iTunes online music store in Europe in 2004.

Steve Jobs, Apple's mercurial chief executive who helped found the company in the 1970s, has staked his reputation on the touch-screen, easy-to-use phone and music player catching the imagination of customers in the same way the iPod has.

When iPhones went on sale on June 29 in America, Apple fans braved heat and downpours to queue for days to buy what has been dubbed the "Jesus Phone" by Internet bloggers who see it as the ultimate mobile device.

Tough Conditions?

"Although it would make a great deal of sense for Apple to go with Vodafone, it doesn't really fit with Vodafone's emphasis on their own music content and portal," said Carolina Milanesi, telecoms analyst at Gartner.

She added that Vodafone tended to take power away from mobile phone manufacturers in handset deals, while "Apple dictates conditions." Vodafone declined to comment.

O2 has stood out in the industry for playing down high-speed, third-generation (3G) services. This strategy would fit with iPhones, which look set to run over slower 2.5G networks, possibly until March 2008, analysts say.

Apple, which has said only that it plans to launch iPhones in Europe this year and in Asia in 2008, was playing its cards close to its chest on Thursday. "Apple is not commenting," said a spokeswoman. "There is no U.K. launch date."

But rumors have swirled since January, when Apple muscled into the mobile phone market by unveiling the iPhone, that possible European partners included Vodafone, Deutsche Telekom and independent retailer Carphone Warehouse.

Apple was criticized in the United States for striking an exclusive deal of at least two years with the largest U.S. telecoms network operator, AT&T , because some customers might suffer weak signal strength despite paying $499-$599 for a handset on top of a pricey two-year contract.

And the handset itself also it critics. Some U.S. users have complained that the touch screen is cumbersome, that data speeds are too slow and battery life too short.

But others applaud Apple for its design creativity and its ability to create "status symbol" gadgets that consumers pine for. "The iPhone is just glamorous," noted one analyst.

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