Matthew Key was in California last week, briefing Steve Jobs on the iPhone's impact in the UK.

The incoming chief executive of O 2 Europe, which is the exclusive mobile network for the iPhone in the UK, gave an upbeat report to Apple's chief executive.

Mr Key says 200,000 iPhones should be sold in Britain by early January, which is in line with his expectations since the November 9 launch, al-though some analysts claim his target is conservative. Gartner, the research firm, says sales of up to 400,000 should be possible.

In his first interview since his promotion to the top job at O 2 Europe was ann-ounced, and speaking ahead of his trip to Apple's Cupertino headquarters, Mr Key says: "The big question for us is, 'What does the future look like in terms of product roll-out?'."

Apple's iPhone has been widely praised for how its innovative design makes data services such as web browsing a user-friendly experience, but it has one big flaw: it runs on second generation mobile networks.

Those networks offer slow web browsing speeds compared to those that rely on 3G mobile technology.

A 3G version of the iPhone is due to be launched by Apple next year and Mr Key is confident that O 2 will also have an exclusive deal for the mark II device.

O 2 has signed a multi-year deal with Apple for the iPhone and Mr Key insists Vodafone, for example, could not muscle in and take the 3G iPhone in the UK.

Mr Key's promotion by Telefónica, Spain's leading telecoms company, which bought O 2 last year for £17.7bn, is in no small part due to his success in capturing the iPhone for the UK market.

He saw off keen interest from Vodafone, Orange and T-Mobile, although some of them subsequently claimed they rejected Apple's commercial terms because they were too onerous.

Mr Key insists the iPhone is profitable business for O 2 in spite of its highly unusual revenue-sharing agreement with Apple. Under the deal, part of the monthly payments made by iPhone customers to the UK mobile operator for phone calls and data services are passed to the US computer company.

Capitalising on the iPhone is one of Mr Key's top priorities as he succeeds Peter Erskine as chief executive of O 2 Europe at the end of January.

Mr Key, 44, looked nervous when as chief executive of O 2 's UK business he stood alongside Mr Jobs at Apple's flagship London store in September and outlined plans for the November 9 launch.

But now he appears confident and relaxed about the prospect of running O 2 Europe's empire, which also includes mobile businesses in Germany, the Czech Republic and Ireland. At €13.2bn (£9.5bn), they generated 27 per cent of Telefónica's revenue in 2006.

Mr Key is excited about how iPhone customers are turning out to have a big appetite for data services. About 60 per cent are sending or receiving more than 25MB of data a month, which is the equivalent of sending 7,500 e-mails.

By comparison, only 1.8 per cent of O 2 's other mobile customers on monthly contracts are consuming more than 25MB a month.

The O 2 research suggests that after years of dashed hopes for the operators, customers are on the verge of surfing the web on their mobiles in significant numbers. This could in the future make mobile advertising a significant revenue stream for the operators.

In the near term, the iPhone may help Mr Key in the tough task of trying to maintain O 2 's position as the UK's largest mobile operator. Vodafone is resurgent, but Mr Key highlights how the iPhone is enabling O 2 to steal customers from rivals. About 60 per cent of iPhone users are new to O 2 .

O 2 will in the new year step up marketing of its new fixed-line broadband packages, which were launched in October.

O 2 is a late entrant to the hyper-competitive UK broadband market, but Mr Key insists it can hit its target of having 1m customers by 2010. Analysts at Enders Analysis say 400,000 is more realistic.

However, Mr Key's most pressing challenge is the turnround of O 2 's faltering German mobile business.

The German mobile operators are embroiled in a ferocious price war. O 2 's German business is the third largest, yet it is well behind that of rivals T-Mobile and Vodafone and has seen its revenue fall for three successive quarters.

At Telefónica's second- quarter results, the revenue growth guidance for O 2 's German business was reduced because of its difficulties. It was the first time O 2 had ever downgraded guidance.

However, Mr Key stands by O 2 Europe's forecast that its group of businesses will increase revenue by between 11 and 14 per cent in 2007, and operating profit by 7 to 10 per cent.

Matthew Key

* Jan 2008 Chief executive, O 2 Europe

* Jan 2005-present Chief executive, O 2 UK

* Feb 2002-Dec 2004 Finance director of O 2 UK

* 1999-2002 Various positions at Vodafone UK, including finance director

* 1989-99 Financial roles at Grand Metropolitan, Coca-Cola and Kingfisher

* 1984-89 Accountant at Arthur Young

* Economics degree from Birmingham University; married with three children