Apple picks Orange for iPhone in France One version to let users choose network

Apple picks Orange for iPhone in France One version to let users choose network
Byline: Kevin J. O'Brien The New York Times Media Group
Edition: 5
Section: FINANCE/BUSINESS

BERLIN --

Katrin Bennhold contributed reporting from Paris.

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Apple said Tuesday that it had signed France Tlcom's wireless unit, Orange, to be the U.S. company's exclusive seller of the iPhone in France, agreeing for the first time to sell a version of the device that consumers can use on any network.

The move, which ended a month of speculation, is a concession to a French law that forbids bundling the sale of a mobile phone and a mobile operator. Orange plans to sell both a version of the iPhone locked to its network in France for 399, or $560, and an unlocked version, which will cost more, an Orange spokeswoman, Batrice Mandrine, said.

Mandrine said the cost of the unlocked version of the iPhone, which is being sold in the United States locked to the network of its exclusive sales agent, AT&T, as well as the length of the French service contract for the 399 version, will be announced in November.

Apple last month signed exclusive agreements to sell the iPhone in Britain with O2, the wireless unit of Spain's Telefnica, and in Germany with T-Mobile, a unit of Deutsche Telekom. But speculation that the iPhone's introduction to France was in jeopardy began mounting after the Apple chief executive, Steve Jobs, bypassed an Apple user's convention in Paris after making appearances introducing the device in London and Berlin.

Apple, based in Cupertino, California, then declined to confirm remarks that the France Tlcom chief executive, Didier Lombard, made to journalists on Sept. 20 that Orange had won the iPhone contract. Mandrine said the agreement to sell the iPhone had been reached when Lombard made his statement, but that the companies had delayed an announcement until Tuesday as they finalized the commercial terms of the agreement.

"This did not have to do with locking or unlocking the phone," Mandrine said. "It was about finalizing the commercial agreement."

The pact with Orange gives Apple an exclusive sales agent for its the iPhone in Europe's three largest markets.

Mandrine declined to say whether Orange had agreed to give Apple a portion of the service revenue that iPhone users will generate with the device in France. Analysts have said Apple is receiving up to 30 percent of operator revenue for the phone, something unheard of in an industry that has been dominated by operators.

Some industry experts said Apple's negotiations in France had likely been held up by the company's demand for a slice of revenue.

"For operators, having an handset maker suddenly demand a slice of their revenues is like being asked to change your religion," said Gerry Collins, the director of strategic marketing at Nortel Networks, a Canadian company that makes wireless phone networks. "This is really a significant change for the industry."

Jean-Marc Dupuis, a vice president at Creative Labs, a maker of mp3 players and a competitor to Apple, said Apple was a company that aggressively pursued its own market strategy. Apple's iPhone includes the iPod mp3 player.

"This is Apple," Dupuis said. "If you look at their strategy, they run the show the way they think it ought to be run."

Apple's agreement with Orange was a further sign that previous French legal concerns over the U.S. company's business practices - including Apple's use of digital rights management controls to bind iPods to its own iTunes online music exchange in France - would probably not hinder the company's sales in Europe. Although French lawmakers passed a law targeting Apple's iPod-iTunes strategy, the law has so far not hindered Apple's operations in France.

"We are excited to partner with Orange and bring iPhone to France in time for the holidays," Jobs said in a statement.

Apple had been tight-lipped about its plans in France. Asked for details on the situation, Alan Hely, Apple's chief European spokesman, wrote in an e-mail message this week: "As you know, we have launched iPhone in the U.S.A. and we have set the launch date for the U.K. and Germany as 9 November. We have not announced any other country launch dates in Europe."

Many analysts had believed that Apple had been stymied by a law passed in 1998 barring network operators from locking new devices to a network for more than six months.

Philippe Achilleas, a professor of telecommunications law at the University of Paris, said it was unlikely that Apple would succeed in circumventing the prohibition. He added that mobile operators were also not likely to seek a change in the law, as they are trying to rebuild their image after a December 2005 decision to fine the three largest mobile operators for conspiring to fix prices.