U.S. News

Britain's Vodafone Rides High on iPhone Hopes

By Reuters

Shares in British-based Vodafone set fresh year highs on Thursday, helped by hopes the mobile phone giant was set to clinch a deal to bring Apple much-hyped iPhone handset to Europe.

As die-hard Apple fans camped outside company stores across the United States to await the first sales of iPhones on Friday, Vodafone's buoyant shares jumped as high as 168.7 pence, and were up 2.14% at 167.3.

Apple, a computer company that has reinvented itself as an innovative consumer electronics firm, ruffled industry feathers when it broke into the mobile phone market in January by unveiling the iPhone, a touch-screen handset and music player.

Apple has signed up top U.S. telecoms operator AT&T in an exclusive deal of at least two years to sell the phone in the U.S., where customers willing to sign a two-year contract are expected to pay $500 to $600 for a handset.

Analysts have said since April that Vodafone's 200 million subscriber base, compared with around 61 million for AT&T, a presence and coverage in around 60 countries and investment in advanced technologies make the mobile phone group the most likely partner for Apple in Europe.

But some say Apple's demands might yet derail any talks. "There are only three or four contenders in Europe," said Robert Grindle, telecoms analyst at Dresdner Kleinwort.

"Vodafone has a strong chance. But some of those other operators ... may be more desperate to kowtow to Apple requests.

"If Vodafone don't get it, it is because they don't think it's economically rational."

High Hopes

Nevertheless, broker Credit Suisse, which is expecting a European announcement in July, has already estimated that a five-year exclusive deal to sell the iPhone in Europe could add eight pence to Vodafone's share price, taking it to 178 pence, according to its valuations.

Germany's Deutsche Telekom, Paris-based France Telecom and Spain's Telefonica have also been tipped as contenders.

One source familiar with talks in Europe has said only that although all operators are keen to get their hands on the iPhone in time for Christmas, Apple wanted to make a "big splash."

Vodafone has consistently declined to comment on any talks with Apple. But Dutch magazine Bright has reported that discussions hinge in part on volume guarantees and sales.

Apple was demanding guaranteed sales volumes, which Vodafone was resisting, the magazine said. Vodafone, it added, also did not want Apple to control the sale price of the handsets and wanted more scope to subsidise the phones.

The iPhone handset comes with an in-built iPod -- Apple's hugely popular digital music and video player -- a web browser and e-mail software.

It is not the first to combine such services. Some European telecoms experts say mobile phone manufacturers such as Sony Ericsson, the Japanese-Swedish joint venture, and market leader Nokia of Finland, rival the iPhone with their respective W950i and N95 handsets.

Sony Ericsson's W950i is a touchscreen phone with 4 gigabytes of music storage, and fast Internet access. Nokia's N95 handset offers high-resolution 5 megapixel pictures, music, e-mail, web browsing, GPS mapping and fast movie downloads.

But Apple is armed with a powerful brand that inspires an almost cult-like following, a reputation for stylish designs that are easy to use and is renowned for its canny marketing.