Financial Times FT.com

Apple secures Europe iPhone revenue deals

By Astrid Maier in Hamburg and Volker Müller in Munich

Published: August 21 2007 19:53 | Last updated: August 21 2007 19:53

Apple has succeeded in committing European mobile phone operators that want exclusively to sell its new iPhone to share parts of their revenues with the technology group.

The contract, which was signed by three European mobile operators in recent days, requires that the operators hand over to Apple 10 per cent of the revenues made from calls and data transfers by customers over iPhones.

The contract was signed by T-Mobile of Germany, Orange of France and O2 in the UK, people familiar with the situation told FT Deutschland, the Financial Times’s sister paper.

The operators are set officially to announce the partnerships at the IFA trade fair in Berlin at the end of August.

T-Mobile, Orange and O2 declined to comment on Tuesday.

The deal gives manufacturers of handsets for the first time a direct share of the revenues a mobile phone operator makes from calls and data transfers, marking a shift in the relationship between the parties.

Until now, mobile operators have campaigned fiercely against such an approach, but industry experts expect that Apple’s success in securing the deals could spur other handset manufacturers to try to secure similar terms.

In the US, AT&T has negotiated a two-year contract with Apple, which is understood to be unusually heavily weighted in favour of Apple.

The deal could be particularly significant for Deutsche Telekom, which is trying to shed its image as a slow-moving business that provides poor customer service.

Mobile operators are said to be hoping for a significant boost in their image from the exclusive deal with Apple, as well as a pool of attractive customers with high rates of spending on calls and data transfers.

Hamid Akhavan, chairman of Deutsche Telekom’s mobile business, is said to have campaigned for personal talks with Steve Jobs, Apple’s chief executive, about the contract, while Peter Erskine, chief exeutive of O2, is said to have tried the same.

“These are not negotiations among equals. Apple clearly had the upper hand,” one industry expert told FT Deutschland.

Apple has also lured the mobile operators with the prospect of a financially risk-free business, as it will not allow the now common subsidies on the sale of handsets. Most mobile phones are sold by operators to subscribers at a highly subsidised rate.

Apple has previously said that it wants to limit iPhone’s European launch this autumn to the UK, France and Germany. It will continue the roll-out elsewhere in Europe next year, when it will also launch in Asia.

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