Elizabeth Judge, Telecoms Correspondent
We've made some changes
to The Sunday Times

O2 has beaten its rivals to win the exclusive UK rights to offer Apple’s iPhone. The tie-up, the mobile phone industry’s most sought-after deal in years, marks a major coup for the 18 million-customer group. The final contract is expected to be signed imminently.
The phone, which should be on sale in time for Christmas, is expected to prove a key weapon in enabling O2 to win and retain customers in one of Europe’s fiercest mobile markets.
It is understood that negotiations are continuing with mobile phone retailers including Carphone Warehouse over an agreement to sell the iPhone in their stores after a period of exclusivity with O2.
Shares of O2 ’s owner, Telefónica, of Spain, are expected to surge today on the back of the news.
The deal will come as a bitter disappointment to Vodafone, which had been tipped as the front-runner for the deal.
Arun Sarin, Vodafone’s chief executive, had been pushing hard to secure a deal for the iPhone, which has been at the centre of one of the most fiercely contested mobile battles since the £22.5 billion auction of 3G rights.
However, as negotiations reached a climax, he is thought to have decided that the commercial terms on offer were not viable.
Apple’s agreement with O2 is thought to include a continuing share of the revenues generated by each iPhone customer. O2 ’s network will also have to be specially configured to accommodate the Apple handset. The lure of the Apple brand is expected to lead thousands of UK mobile customers to ditch their existing contracts and switch to the iPhone provider.
In frenzied interest in the United States, more than 500,000 units were sold during the first weekend of sales. AT&T, the exclusive American network, claimed to have sold out of the iPhone in most of its 1,800 stores within 24 hours.
Apple’s shares have jumped by nearly 50 per cent since the first prototype was unveiled in January, adding about $34 billion to its market value.
O2 hopes that the Apple deal will help it to cement a niche as the country’s major music mobile operator. The group has already rebranded the former Millennium Dome as the O2 and transformed it into a concert and leisure venue.
The deal is one of several negotiated by Apple across Europe. T-Mobile is understood to have secured an agreement to provide the phone in Germany, its home market. Orange is tipped as the likely front-runner in France.
Apple, which had initially considered striking one Europe-wide deal, is thought to have felt that it could maximise revenues by negotiating individual market tie-ups.
The California-based group is also thought to have been keen to ensure that it worked with the strongest operator in each country.
In the UK customers signing up for an iPhone are likely to face hefty fees to buy themselves out of their existing contract and move on to O2’s network.
The phone is expected to retail at about £300 in a market where phones are traditionally given away.
Rival handset manufacturers are busy preparing “iPhone killers” for Vodafone and the other losing operators. O2 and Vodafone both declined to comment.
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To James from Burnley:
Vodafone is the 11th largest company in the world with a FREE CASH FLOW of £11B
They aren't going bankrupt or being bought out any time soon. Also, if you ask the regulators or anyone in the mobile industry they will agree that Vodafone has the best coverage (regular or 3G).
Callum, Aberdeen,
And in response to you Mr Chris Davies of Manchester, UK.
As you can see, the iPhone is tied solely to the allbeit hellish O2 network. So where to you O2 were denying signing a contract - the professional research of the Times journalists over simpleton Bloggers trumps top once more. Who are you to question the might of this great powerhouse of professional journalistic excellence?!
Johnie Walker, Edinburgh,
I have an iPhone in the UK running on Vodafone, although I could choose whatever network I like and I can assure you that, for most people, the functions on offer are more than adequate.
There may well be more powerful alternatives, if you need that power, most people do not. And, as phone it is a lovely device to use (the best I've used in years) as well as easy and intuitive.
I'm no Apple fan although I occasionally use a MAC but, I have to say, that it's not just hype as it is a seriously good device.
Kenneth Watt, Kilmarnock,
Today's 300 pound phone is tomorrow's priceless paperweight. The iPhone Nano or a beefed up standard iPhone will be out in one year, and as soon as you get that one, another is around the corner. There are plenty of 8gb hard drive phones available (Nokia N93 music edition for instance), and many feature upgradable memory. It is simply illogical to buy an iphone, which leads me to conclude the Apple zealots just go for hype. The iphone is a childs toy and an expensive one. This won't replace the Blackberry or superior Windows based pocket PCs, as those phones are for serious communication and far more versatile. Apple's phone is a good novelty but novelties shouldn't be too dear. You get an iPod Classic with 160gb memory for less. There is nothing the iPhone could do that other competing handsets can't. Even the Nokia 6230i features web access (if you download the brilliant Opera Mini), and the more sophisticated phones have far more features. Personally, I'd wait for the T-Mobile MDA Vario 3, the specs of which wipe the floor with the iPhone. T-mobile's unlimited data packages are affordable and 3g network plus HSDPA allows great web usage, and with a variety of apps available, you could do everything iPhone does and more. iPhone looks cooler though!
Eccleston Gallagher, Dublin,
A lot of hype over nothing!
Still...wonder if it'll be available on Pay As You Go?
J, Edinburgh, Scotland UK
hi, all
just thought you like to know,i have just noticed on my blackberry curve, 8830, that im getting a Edge signal on the o2 net work,i did phone o2 this afternoon to ask if thay have upgraded there gprs to Edge,thay said no and we do not support it,
the browsing was great in to the bbc etc and flickr, and the load time was great,mutch better than 3G is some times
ow by the way the date is 23,08.07
so i would think it may be o2 are upgrading for the i,phone and i dis aske that as well,the gut said he did not know
paul bevan, andover, england
The decision to go with GSM (2.5G) and not 3G was because of the widespread deployment of it - if you've ever had a 3G phone (I have and returned it) you will find the coverage is very poor, you are more likely to get WiFi coverage.
The iPhone is revolutionary mainly because of the browsing capabilities and combination of communication/entertainment/UI features. Suddenly there is a new generation of hand held device and it's sales show it - and that's why I'll be having one.
David Hall, Leeds, UK
Its widely reported that the iPhone has several disadvantages over in the states. But because this country is always a few months behind, once those updates are out worldwide people over here will be buying a iPhone that might be significantly different to the one they are seeing at the moment in the states.. thats why i am gonna be waiting in line to grab mine..
Gary Brayne, Croydon, London, UK
Hello All.
I have been using my shiny new iPhone for a few days and it works great. A few quirks that I expect to be fixed during regular software updates. (When have you ever had functionality updates from a mobile provider)! None that Iknow of here in the States.
The AT&T EDGE network 2.5G seems pretty snappy, although I am told they did some updates in anticipation. At work and at home the thing just automatically connects to the WiFI I had set up without any interruption and I get 80211.G speeds.. Also if there are WiFi spots nearby, it will ask if you want to connect automatically. You can just decline and continue to use the 2.5 network.
The phone is useless without an unlimited data plan which Apple seems to have knuckled AT&T under to provide for $20 US per month. 1/2 of what I would have been charged before the iPhone plans. (That's right these plans are only for the iPhone so I am sure your carriers will agree to something similar to what AT&T did).
Cheers.
Chuck, Tewksbury, MA
The iPhone not a speacial as it may appear, although it does have a revolutionary feature namely the touch screen interface it is still only a 2.5G phone. Until this deal was struck there was hopes that Apple would produce a fully 3G version of the phone for the european market. By signing with O2 this possibilty now seems remote as O2 as a network have been slow to capitalize upon third generation advancements. Had the iPhone been realease by Vodafone for example (without a 3G upgrade) exisiting customers of the network used to full access to the internet at high speed may have been very disappointed by the phones slower performance.
However the likely new customers for iPhone will not care about the performance, it is simply an expensive fashion accessory. The question remains will people be willing to pay £300 plus network contract costs when other networks offer phones with equal or superior capabilities for free?
Scott Parker, Leeds, UK
hold your horses it's way too early we should know better by next month things might change
peter harris, m'stone kent, uk
Great product, but i suspect to much aimed at the US market in terms of network connection limitations i.e. no G3 or WIFI.
Probably worth waiting for Apple to Europeanise the product first.
Will wait to see how things develop for a while..
rupert chandler, pewsey, wiltshire
The demand is there, the few is the 500,000 that bought one over the launch weekend in the US.
'Consumers are returning the LG Prada in droves because of the awkward formset (which the iPhone copies).'
The Prada is a completely different phone for a different market. It only has single touch capability, and I am pretty sure the software which backs up the touch keyboard is a lot better on the iPhone
-----
Now on a more important note. Even if you do not plan to get the iPhone, having Apple in the industry is going to make things better for you.
The manufacturers were quaking in their boots when it was finally introduced. The iPhone will further innovation in this industry, which is well overdue.
Thomas, Coventry, Warwickshire
Apple are briliant designers - it's not form over function but a beautiful marriage of the two. I'll certainly be in the queue to buy one.
paul gomez, Emsworth, UK
Also, talk of iPhone 'killers' is very, very premature. Remember all the iPod 'killers' ? No, neither do I.
andy, Birmingham,
mmm so (if correct) O2 are getting iPhone eh ? Well thats very bad news for anyone not living in a large conurbation. The only network over the years I've found to have more coverage than any other around Europe is Orange. In the rural counties, Orange is the only practical choice for decent coverage. I guess I'll have to get one in France or wait for the hackers to unlock the thing from being tied to one exclusive network. BIG (potential) disappointment for many.
Simon Harper, Cleobury, Shropshire
im pleased o2 have won the exclusive rights, as im a satisfied o2 customer having ported my number from Vodafone a few years back. I would have gone back to vodafone and suffered the poor service, just for the iphone, but am delighted I can stay with o2 and get the iphone.
amjed hussain, Hale, Cheshire,
I am surprised at how much folk like to knock this phone before they have even tried it! It never ceases to amaze me how poorly designed most phones are in terms of ease-of-use. They typically have a huge feature list but using it becomes another matter. Something as simple as finding a particular contact in your mobile's phone book can be surprisingly laborious. It seems to me that Apple have tried to address the problems of a mobile phone usability far more than most and for that I applaud them. For that reason I shall make the time to try the iPhone out for myself when it is released and reserve judgement till then.
Tom, Wrexham,
The iPhone represents a shift in what people, especially younger ones, will expect from now on. Those willing to put up with the perceived shortcomings now will, overall, push the industry to move along at a quicker pace. Potentially, to be benefit of us all.
James Hanika, London, UK
Why is this craze about iPhone I really fail to understand.
Any windows mobile 5 or 6 phone does much great job then what iPhone can do.
People should really check those out such as HTC phones which are named by O2, T-mobile, etc differently.
Paul Axa, Eastbourne,
As people have said on the web, lots of people and other mobile companies are just looking at the iPhone and another phone and saying "Web, Email, Music etc. both phones have these". Similarly people compare Macs and PCs or iPods and other MP3 players and point out that the Apple product has the same or fewer features than a cheaper alternative.
The difference between the Apple products and the others isn't what they do, it's how they do it. Who here with a mobile can say that they actually find the web useful and something they use a lot? How many people use their mobile phone to access their email a lot? Who here actually enjoys listening to music on their mobile as opposed to dedicated player?
People need to stop just comparing feature lists and start comparing implementations. Apple has historically been the company, who doesn't invent something new, but who innovates and makes something accessible to the majority.
Martin Pilkington, Accrington, Lancashire
"In the UK customers signing up for an iPhone are likely to face hefty fees to buy themselves out of their existing contract and move on to O2âs network. "
How sad do you have to be...it's only a phone!
Luke Nicolaides, London, UK
"let's see if they can outdo Mac OSX, which is the software behind the performance."
Talk about perpetuating a myth. Somehow I doubt the iPhone shares very much of the OSX kernel...
Bob Tom, London,
It is obvious that the iPhone is a great seller and that Apple have a winner it can only be good for O2 and Telefonica.
People will buy it , it is unique just look at the iPod, Blackberry now have to raise their game, I think that Nokia and Samsung will have a rival soon.
Chris Williams, Warrington, UK
Mac users are not supported in O2 billing system - This is somewhat worrying, I had this from O2 this morning when trying to view my bill on there website i wrote them and got this reply -
"You're unable to view your bills because our website doesn't support the Macintosh computer.
Please try to view your bill on a computer that has Windows. I'm sorry for any inconvenience this may have caused and thank you for your patience."
If I was from Apple and in discussions with them I would tell em to get out door.
Simon, Leeds, UK
I love the ending: Rival handset manufacturers are busy preparing âiPhone killersâ. Yes, sure. Just like CE makers have been able to make an iPod killer in the last 5 years.
It's good to see the iPhone coming to Europe. I can't wait to get my hands on one.
Jeff, London,
The iPhone will be 3G for the UK, and released in line with Leopard. O2 will also offer existing customers the chance to upgrade with only the cost of the handset and the cost of upgrading to unlimited data of course, then all the O2 customers walking around with iPhones will no doubt attract people from other networks.
Insider, NCL, UK
To those complaining about the onscreen keyboard. OK it may not have tactile feedback but it's a damn sight more intelligent than that of a blackberry pearl. If it is intelligent enough to auto correct as you type and invisibly widen the sensor for a more common letter following those that you have already typed then i'm sold. Apple say that if you trust that the keyboard will wok it out, it'll work like magic.
And about the EDGE network that people are saying that O2 don't have... well the i-mode feature of the O2 network is the EDGE protocol rebranded.
And to Brad of Romford, I believe this too. It made sense for Apple to use EDGE in the US because it is highly adopted there. I suspect that Apple have noted that 3G usage in the UK is far more prolific than EDGE/GPRS. I'm sure there working on the 3G version for the UK. If not I'd be suprised.
I'm actually glad that O2 are the carrier for the iPhone. I prefer their tariffs to other networks, bit thats just me.
Simon Lenton, Grays, Essex
If O2 doesn't have EDGE (I didn't know that), then I think we can take this as a sure sign that the UK iPhone will be 3G. US users report that the EDGE speeds (as opposed to 3G) are the one real weakness in the iPhone. The device just would not work the way it is supposed to work if it were GPRS only. And Steve Jobs won't let that happen.
Either O2 reconfigures their network for EDGE (seems unlikely) or we'll see a 3G iPhone soon.
fronesis, Swansea,
The UK and Euro iPhones WILL be 3G - you watch... :-)
David Hughes, Milton Keynes,
The more i read about the iPhone the less bothered i am, it looks really cool, but is missing too many features, MMS, 3G, Bluetooth file transfer, IM to name a few
Fred, Southampton,
Thank goodness it won't be on T-Mobile's lousy network! I didn't care which of the other majors (I don't count "Three") because they all have decent country-wide coverage.
Rob, Worcester, UK
It looks like Apple's terms really draw out the underdog. Mobile companies want to charge bit by bit (literally?), whereas Apple wants all iPhone's key features to be included & unlimited use. The iPhone is so elegant and powerful it makes me dizzy. And EDGE isn't horrible, either.
Chris, from Texas,
O2's network is most certainly not EDGE-less. You know that i-Mode thing they have? Yeah, that's just EDGE rebranded.
Drarok, Redditch, England
This is great news, I've been with O2 and its previous incarnations for nearly 7 years now and I've been hoping they would get the iPhone. Im especially looking forward to marketing campaigns using Apples[iPhone] to Oranges[the network] comparison puns. I doubt the iPhone will retail for as little as £300, foreign companys love to make a little more profit from our pound than follow the standard currency conversions.
Mark Edwards, Sutton Coldfield,
Though the iPhone looks very interesting in its features, the next phone I will be going for is the HSDPA enabled phone. Mobile Web Browsing is the next big thing ;)
Boyd Chung, Acton Town, London
After a rush of "early adopters" I wonder how many ordinary consumers will fork out £300 to gain only a few features and a "style" advantage over other manufacturers phones which are given away for free.
Tony, Birmingham, UK
I was one of the first people in the states to have an iPhone and can testify that typing messages and emails and web browsing are truly intuitive. I'm on my way to work right now and writing this review whilst driving! After a week with the iPhone you'll find its easy to text your heart out. I dunno what network will be best for uk and other nations but on the AT&T edge network the iPhone works rather well loading most pages about half as fast as 802.11g networks. Of course once you go to a graphics intensive website then the load period is substantially longer. All said and done I believe that iPhone cynics would secretly have a change of heart if they were given a week to play with one!
Scott Blair , Jacksonville, Florida, USA
iam so HAPPY!!!!!! IM O2!!!!!!WHOO HOO
FGHRFT, GHRTFY, FGHDRTH
T-Mobile already offer effectively unlimited data via web'n'walk, orange and voda are due to roll out their equivalents shortly.
There is slightly less than no chance that O2 will be allowed to sell the iPhone attached to anything other than an unlimited data plan - its a fundamental element of the package.
James Murphy, Consett, UK
If Vodafone and O2 both declined to comment, and Apple is famously secretive, how is anybody supposed to give this story any credibility?
John, Wellbert,
O2 apparently have plans to add EDGE to their network - a matter of a software upgrade rather than hardware change - while I'd wager that the reason for ebay iPhones going for so close to store price is because there's no real shortage of official retail options. It's only when the stores are sold out that ebay starts getting frantic.
I'm no Apple fanboy - don't have an iPod and don't want one - but just wanted to clarify those points.
Actually, what I'm more interested in is timesonline's source for this story; where did it come from? O2 are denying they've signed a contract, whereas this article seems to be calling the whole thing a done deal.
Chris Davies, Manchester, UK
If its a one year contract then count me in. As i'm pre-pay at the moment i wont have any problems switching.
I dont care too much about GPRS as i have WIFI at home and WIFI at work.
Sean, London,
Style over substance? I believe the substance is its usability. imagine the failure of major companies whose prime product is a phone which has to be heavily subsidized just to sell it. Here is a product which, is not flawless, but such a pleasure to use. that is substance as well, not just technical specs.
denis, copenhagendenmark,
Why do people think it's going to be GPRS only? General consensus in the mobile industry is that they couldn't possibly get away with that. I will be very suprised if it is GPRS only, it seems senseless to cripple one of the main selling points of the phone (an internet device), especially considering the only other way of using the internet on it, wifi, is very expensive over here, and with far less access points than in the States. I'm confident it will be a 3G device, possibly with a lower battery life as a result (a price worth paying), and probably with various software enhancements to address some of the criticisms so far.
Alex Kerr, London, UK
Arriving late in 2007 the iPhone will face some extremely stiff competition. It's already dated in not offering Instant messaging and worse still not only 3.5G but not even your staple 3G data speeds! Nokia's N95 hinted at the potential of a small and easy to use mobile phone with awesome functionality (More than the iPhone) and I can only imagine what amazing handsets will be arriving towards late 2007.
The iPhone has the hype but in terms of functionality it's nothing groundbreaking - a shame because I'm a massive Apple fan.
I think Vodafone will now be working with manufacturers to deliver some seriously strong competition for the iPhone - I can't wait!
Justin Berkovi, London, London
We heard all the same negative comments as these guys are saying when Creative owed the MP3 player market. Now everyone owns an iPod because it just works. It isn't the best hardware on the market but the combination of the iPod software + iTunes = the best user experience out there.
The iPhone will be the same. Remember this is a 1.0 product - the original iPod was a bit clunky and only had 5GB of storage but over time Apple have refined it and made it a success.
Like it or not, the iPhone will be successful. It will get better over time as technology progresses. In a couple of years it may have HSDPA, WiMax and Spread Spectrum.
Apple are adept to using new tech but only when it makes sense.
In the US, 3G is not widespread enough to warrant the f battery life vs network speed trade off. In Europe this may be different and we may see a 1.1 version with GPRS/HSDPA because it makes sense here.
Five months is a very long time in technology - don't be so quick to write the product off.
Brad, Romford, Essex
As an absolute Apple fanatic I was really looking forward to getting an iPhone, but if its locked into O2 then quite frankly they can keep it!
The fact Apple insists the handsets are sold at full price and not subsidised like other handsets means that it should be available to use on any network and not tied into a 12, 18 or 24 month contract with O2. Usually the whole point of a contract is that it allows you to obtain a new handset at a significantly reduced price in exchange for agreeing to a long-term contract. With this arrangement, Apple and O2 are essentially gouging their customers from the minute they join.
I think Apple are making a big mistake in forcing people to change their mobile provider in order to buy one of their iPhones.
Nathan, Belfast, Northern Ireland
@dom except vodaphone are already one of the worst networks in the UK, whereas O2 and Orange are the leaders in the market. So the only laugh Vodaphone will get is when they either go bankrupt or get bought out.
James, Burnley,
The iPhone won't have 3G in the UK (just like the US) making it redundant tech from day one. nice one Apple.
Tim, Cambridge, UK
the ipod generation in the UK love to send text messages, they use this more than calls to keep in touch with each other. I guarantee that nobody who sends more than 1 text a day will want the iphone once they try using its onscreen touchscreen keyboard to write a text message. you cant write a message quickly, you have to use a qwerty keyboard, and you get no feedback as there are no buttons. Might sound alright to some, but not to most.
there is nothing else about this phone that wouldmake people buy it. Anyone who can afford this phone will already have a dedicated ipod or equivalent mp3 player by now, so other than looks, what is its selling point?
dave, london,
The iPhone - a shocking example of style over substance.
Consumers are returning the LG Prada in droves because of the awkward formset (which the iPhone copies).
It is bound to be a success because of the Apple brand, but there are many handsets available today (such as the N95, U600 and Blackberry Pearl) which blow it away in terms of functionality. Also - available O2 only and £300 a pop : I'll be sticking to the superior (and free) Sony Ericsson k810i on T-Mobile Flext 35.
Mitch, beaconsfield, UK
My main concern is that we in the UK get the unlimited data packages offered to US customers.
What are the chances that we get charged by the megabyte?
Matthew Jones, Newcastle-under-Lyme, United Kingdom
I trust O2 will be more reliable than my laptop USB internet "service" from Vodafone.
As for the "iPhone killers", let's see if they can outdo Mac OSX, which is the software behind the performance.
Whether they do better than the numerous "iPod killers" that have been and gone is moot -- but will be interesting to watch.
David Jefferis, Brill, UK
I'll stickl with my own phone, because I'm already with O2 and I cant see [off-hand] what the good things are. All I see is a phone owned by Apple
AH, Livingston, UK
Apple haven't picked the strongest operator. O2 are currently the most hungry, dynamic of the 4 operators, but more the underdog.
Orange / T-mobile may not have got it because they operate on a higher frequency which tends to drain batteries more quickly, reducing iphones usability.
Orange has the closest ties, with the link up with Google. Vodafone probably got upset when they found the deal had already been done in France and Germany, preventing a pan-european launch.
O2 is more 'data friendly' in terms of costs, has a more reasonable unlimited data tariff, and may have been less keen to 'milk' the data use that is generated by the iphone, as User's realise getting a good data tariff is just as important as included voice minutes with this new type of phone.
Adam Jarvis, UK,
If the iPhone is released in the UK with only GPRS support then I won't be buying it. Its main features are connectivity and GPRS can't provide a good online experience. Sadly disappointing if this is the case.
Jason Scott, Plymouth, UK
'Cool' people use iPod earbuds to demonstrate their 'coolness'. An iPhone poser would have to use it more or less continuously lest their purchased 'coolness' not be on display. This will surely result in O2 making a heap of money out of 'essential' web browsing. The one good thing for iPhone posers will be that their 'coolness displays' will be justifiably lengthy as O2's network is currently EDGEless.
I certainly won't be bothering.
Matthew Barratt, Emsworth, UK
I suspect that Vodafone may have the last laugh in the long run.
The types that collectively wet their pants when a new techno-gadget comes on the market will have been distracted by something new and glittery well before Christmas.
dom in oxford, oxford,
Sarin was right to pass on the iphone. Afterall, if ebay is a proxy, which we know it is for many things, it is wonderful to see iphones selling for $50 over retail, with free shipping...Translation: the speculators are loosing their shirt, the demand is not there for a $600 to $700 phone, except for a few, and the few aren't big enough to move the needle in subscribers and ARPU nor worth it to give up some of your hard fought revenue (via revenue share) for a device that does not contribute incremental value to share holders. So, go buy your iphone and impress your friends...afterall, that's what it is good for, right?
Apple_LUVR, New York,
O2 wouldn't be my first priority, but getting an iPhone is more important than which network it's with. Assuming that the UK model won't be 3G, I had been hoping it would be with Orange, the only UK network to have EDGE. The iPhone with GPRS only will be a real disappointment.
Jon Adam, Bristol, UK