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Mamma Mia! Italians Get 3G iPhone

Apple Inc. (Nasdaq: AAPL) has brokered groundbreaking deals in Italy with Telecom Italia (TIM) and Vodafone Group plc (NYSE: VOD) that mark a shift in the iPhone company's carrier partnership strategy and herald the European debut of the 3G version of Apple's already iconic device.

The Italian deals, announced today, are significant for two main reasons.

First, Apple has broken with its pattern of striking exclusive carrier distribution agreements, by concluding iPhone sales partnerships with Italy's two leading mobile operators. (See Telecom Italia Gets iPhones and Vodafone to Sell iPhones.)

Until now, Apple has agreed to terms with only one operator per country, but Italian mobile customers will get to choose between the country's dominant mobile services duo, a move that should further encourage iPhone uptake in the boot-shaped land. At the end of 2007, Telecom Italia had 36.3 million Italian mobile subscribers, while Vodafone had 22.8 million.

Second, Unstrung has learned from an industry source with knowledge of the Telecom Italia arrangement that the incumbent operator's deal includes the distribution of the already coveted and much talked about 3G iPhone.

The source, who requested anonymity, said Telecom Italia will offer 3G iPhones to its customers this summer, though the source was unable to provide pricing or further device details. (See The $200 3G iPhone?)

It's not yet known whether Vodafone's deal also includes 3G iPhone distribution rights.

Market exclusives
Telefónica UK Ltd. , T-Mobile International AG , and Orange France have exclusive iPhone deals in the U.K., Germany and Austria, and France, respectively. None of the trio would comment on whether they plan to offer 3G-enabled iPhones later this year. (See iPhone Invades UK, iPhone Goes to Germany, iPhone, Oh La La, and iPhone Data Booms at T-Mobile.)

However, recent iPhone price cuts at O2 and T-Mobile could indicate that the operators are clearing their shelves of the current 2G-only devices to make way for the 3G version. (See Apple Sells 1.7M iPhones in Q2, iPhone's Slow Euro Sales, iPhone Price Cut, Le iPhone Update, and iPhone's Damp Squib.) Vodafone deal covers 10 markets
Vodafone's deal with Apple goes far beyond Italy, allowing the international operator to offer the iPhone in 10 markets: Australia, the Czech Republic, Egypt, Greece, India, Italy, Portugal, New Zealand, South Africa, and Turkey.

A Vodafone spokeswoman could not comment on any details about the agreement with Apple, such as whether the devices will be 3G and when they will be available in those markets.

But it's understood that Vodafone has always had its heart set on a 3G iPhone. Before Telefónica UK Ltd. won the exclusive iPhone distribution deal in the U.K. last year, Vodafone's CEO Arun Sarin told the London's Sunday Times: "It's a 2G phone, not 3G. When it's a broadband phone we will be interested in carrying it." (See Vodafone Grooves to MusicStation.)

Heavy Reading senior analyst Gabriel Brown believes it's likely Vodafone's Italian deal will include a 3G version of the iPhone. "Wherever [Vodafone] has 3G, they'll want the 3G device," says Brown, who's excited about the prospect of Apple's device hooking up to high-speed mobile data connections. "iPhone is a great device, but it'll be even better with HSPA."

It's likely Vodafone's deal with Apple will include 2G and 3G devices, because it doesn't have 3G networks up and running in all 10 markets covered by the agreement. Vodafone could offer a 3G iPhone in Australia, Egypt, Greece, Italy, Portugal, New Zealand, and South Africa, where it is already offering 3G services, while only 2G devices would work on its networks in the Czech Republic, India, and Turkey.

Pump up the data volume
Saverio Romeo, Frost & Sullivan research analyst for mobile and wireless communications, believes the 3G iPhone will spur more data usage in Italy where 3G penetration was 38 percent at the end of 2007. "The 3G iPhone will be another engine of growth for 3G usage in Italy. It will also contribute to the increased usage of content on mobile devices," says Romeo. "Besides that, the Apple brand is also able to capture consumers' imagination, transforming any electronic object into a sort of status symbol item."

— Michelle Donegan, European Editor, Unstrung

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