Apple is expected to hand a German iPhone distribution deal to Deutsche Telekom's T-Mobile and a French deal to France Telecom's Orange later this week.
An industry source familiar with talks told Reuters last week that iPhones, which are being sold for $399 in the U.S. before tax, would be sold for 399 euros ($553) in Germany.
Newspapers have speculated that O2 was so keen to win the iPhone deal that it was prepared to hand over as much as 40% of revenues for the unsubsidized handsets to Apple -- more than market expectations of 20-30%.
"I had heard that they (O2) had gone beyond the comfort zone for pricing and that they were willing to go further than others were," said one source familiar with negotiations.
Matthew Key, the chief executive of O2's U.K. business, said only: "We only do good deals."
Customers willing to sign up for 18 months can pick a contract for 35, 45 or 55 pounds per month for the phone, which comes with free, unlimited use of 7,500 public Wi-Fi wireless Internet connections -- in cafes, restaurants, airport lounges and other locations across the U.K.
Carolina Milanesi, an analyst at Gartner, brushed off concerns O2 had yet to upgrade the bulk of its network with EDGE (Enhanced Data for GSM evolution) software, second-generation software on which the iPhone depends.
"The EDGE issue is not really an issue when you have 7,500 hotspots in the country to fall back on," she said.
IPhones flew off U.S. shelves when they first went on sale in the U.S. amid much fanfare in June. But Apple slashed the price of its $599 model to $399 last week, sending its stock falling on market concerns that sales were slowing.
However, Apple has sold more than 1 million iPhones in the United States to date -- beating its end-September target.
Shares in Telefonica stood 2.3% higher, outperforming a flat European DJS telecoms stocks index.