O2 giving up too much for iPhone exclusive?

With Apple expected to name [1] its European iPhone carrier partners at a London media event Tuesday, The Guardian is reporting British operator O2 secured rights to the sought-after handset by signing a last-minute deal one rival operator described as "madly money-losing." The newspaper states O2 will return as much as 40 percent of all revenues generated via calls and services originated on iPhones--moreover, O2 must fork over a commission and future revenue share with Carphone Warehouse, which is reported to be the sole independent U.K. iPhone retailer. The Guardian says the Carphone deal is the result of Apple's fears that O2 lacks a sufficient retail presence despite its 2006 acquisition of The Link chain.

According to The Guardian, the economics of the O2 deal grant Apple such a large share of revenues that its operator competitors could envision no hope of making any return on the device, even over the course of a three-year contract. The paper reports that during the course of Apple's negotiations with the four largest British operators--O2, Orange, T-Mobile and Vodafone--the computing giant played the companies against one another, and that at one time each believed an iPhone deal was securely in place. It is believed Vodafone bowed out of the negotiations early on in response to Apple's tactics and its decision against granting iPhone rights spanning the U.K., Germany and France. Insiders say Apple will announce T-Mobile as its German partner and Orange as its French confederate. 

For more on the O2/Apple deal:
- read this Guardian article [2]

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