O2 closes in on exclusive deal to sell iPhone in UK

O2 is on the verge of wrapping up a deal to exclusively sell the Apple iPhone in the UK with a view to launching the iPod-based handset by Christmas.

A number of Europe's largest operators have been linked with a deal to sell the iPhone in Europe over recent weeks. It is understood that formal deals are now imminent and that O2 is about to sign a contract to sell the handset in the UK. It is understood that T-Mobile, Germany's largest operator, will sell the iPhone exclusively in Germany, while Orange, France's largest mobile phone company, has won the race to sell the handset in France. The iPhone is due to launch across those territories in November.

There has yet to be official confirmation of any deals and a spokesman for the UK's largest mobile operator said: "O2 has not signed a deal with Apple." None of the mobile phone operators would comment on the process given the complexity of negotiations with Apple.

Competition among mobile phone operators for a deal with Apple has been fierce, with the iPod maker understood to have driven a hard bargain. One source said that securing the most talked about handset of all time on an exclusive basis and making the economics work had proved a tough balancing act.

Apple had initially looked to sign a distribution deal with a single operator across Europe, putting Vodafone - Europe's largest carrier - in a strong position. Apple signed a similar exclusive deal with AT&T to sell the handset across the US. But it has decided instead to sign separate deals with the largest operator in each European market for the initial launch of the handset in the UK, France and Germany in time for the Christmas sales rush.

Apple's iPhone, which was launched in the US on Friday, comes with a built-in iPod music player and web browser. The handset is likely to cost around £400 on top of signing a long-term contract with the mobile operator, as it will not be subsidised as is standard in the UK market.