Apple’s new multi-purpose iPhone would only be available in 3 European countries viz only Britain, France and Germany this year. However, sources said that it would roll-out across Europe in 2008. O2, the British unit of Telefonica (a Spanish telecommunications group) has come forward for a deal with Apple, and would become the first European mobile phone operator to enter into a deal with Apple, and would be the sole network partner for the iPhone in Britain. However, the company said that it has “not signed a deal with Apple,” while, on the other hand, Apple declined to comment.

Newspaper reports, recently, disclosed that France Telecom’s Orange was also on the verge of securing a similar deal in France, followed by a German newspaper article citing Deutsche Telekom’s T-Mobile’s attempt to win a German contract, weighed on European market leader Vodafone’s shares.

The Vodafone Group's shares, which hopped last week, owing to securing an exclusive pan-European iPhone deal, slipped down by more than 1%. Telefonica, Deutsche Telekom and France Telecom all three traded broadly flat in a weaker European telecoms market.

Carolina Milanesi, telecoms analyst at Gartner explains "Although it would make a great deal of sense for Apple to go with Vodafone, it doesn't really fit with Vodafone's emphasis on their own music content and portal." She added that Vodafone tended to take power away from mobile phone manufacturers in handset deals, while "Apple dictates conditions" Vodafone declined to comment any further on this.

O2 has been the leading the way in the industry for playing down high-speed, third-generation (3G) services. This strategy would be apt for the iPhones, which seems to run over slower 2.5G networks, possibly up to another 9-12 months.

While O2 has most customers in Britain, T-Mobile take the top spot in Germany and Orange leads in France.

The European iPhone would operate on slower 2.5 generation mobile networks, not the 3G infrastructure of companies such as Vodafone.The iPhone, one of the most eagerly awaited devices in years, went on sale in the US very recently. The slim, pocket-sized phone from the Apple merges mobile telephone, internet browsing, e-mail, text messaging, music and video replay into one device.

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