Vodafone to join UK iPhone battle

Vodafone, the world's largest mobile operator by revenue, has finally sealed a deal to sell Apple's iPhone in the UK from 2010, it said Tuesday - a move that could spark a price war over the popular device.

Vodafone, which said recently it had been hurt in Britain by not securing the iPhone deal, will join France Telecom's Orange and Telefonica's O2 in selling the phone in Britain. It will also sell the device in Ireland.

Orange said Monday it would start selling the phone before the end of this year, breaking O2's exclusive two-year hold on the phone.

"Now that O2's monopoly has finally been toppled and with the iPhone now available on three different networks, we should be able to see a much more competitive market, which is only a good thing for consumers," Neil McHugh of comparison site Rightmobilephone.co.uk said.

Analysts welcomed the announcement, and said it was a huge boost for Vodafone, and a blow for O2. They also speculated that other exclusive sales deals in Europe, such as in Spain, could also soon unwind.

Shares in the British operator were down almost 2 percent at 12:30 p.m., however, which analysts attributed to an unwind from recent gains.

O2 has benefited strongly from securing the first contract to sell the iPhone in Britain, and it currently has over 1 million subscribers to the smartphone.

Users of the phone also tend to use more data services -accessing the Internet, emails and media content - which is becoming increasingly important for mobile operators as the money generated from calls and text messages decrease. 

"We estimate that the iPhone represents more than 100 percent of O2 UK's growth, 6 percent of subscribers, 14 percent of service revenues and 13 percent of earnings before interest, tax, depreciation and amortisation" Bernstein analyst Robin Bienenstock said.

"In the UK O2 has consistently taken contract share from competitors (in particular Vodafone) since its sole distribution of this iconic brand began."

Bienenstock said a 2003 survey showed that 60 percent of British consumers chose their handset, and then the operator, when looking for a new phone, and said this was likely to be even higher for a phone with the "star power" of the iPhone.

Vodafone said in a statement it would now offer the touchscreen smartphone through 13 of its operating companies.