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Telecom Carriers Wrangle Over iPhone Lock

Date: 11/24/2007 5:32:32 PM

Monday marked the start of a legal tussle over Apples contracting arrangement with cellular carriers in this case TMobiles German arm that, if not resolved, could put a damper on iPhone sales in Europe.

Apples popular smartphone and media player is currently available under a 24month contract with TMobile.

UKbased Vodafone (NYSE: VOD) contends that provisions of the agreement fly in the face of German telecommunications law. Specifically, it claims that TMobile is disregarding certain key requirements that apply to exclusive sales contracts for cell phones in Germany.

As a result of the disagreement, Vodafone, which is TMobiles biggest competitor in Germany, has obtained a preliminary injunction, issued by a German court, designed to force close examination of the carriers existing contract with Apple.

For its part, TMobile said there will be no restrictions on continued iPhone sales in Germany.

Furthermore, it indicated it may sue Vodafone for damages.

In the meantime, TMobile said it is meeting conditions of the preliminary injunction, which it plans to appeal.

German Cellular Guidelines
In Europe, which has GSM (global system for mobile communications) cellular networks, users purchase a SIM (subscriber identity module) card, which ties them to a specific carrier. They can also purchase a prepaid removable SIM card from a cell phone vendor, which lets them use several carriers. In the case of Apples iPhone, European carriers with exclusive sales contracts provide a "locked" SIM card.

The contract between TMobile and Apple is subject to German law, Vodafone maintains, which requires telecom carriers that have exclusive contracts with device vendors to "subsidize" the retail cost of the product.

In conjunction with a pointofsale subsidy, the carrier can add a customer interface thats locked to its network , Vodafone said.

Bullied Into It?
Because the arrangement is part of TMobiles agreement with Apple, which gets a small monthly payment from iPhonecontracted carriers, it may be necessary for the companies to renegotiate their exclusive deal.

"TMobile has run afoul of German law, and Apple effectively forced them into it," Burton Group Research Director Dave Passmore told MacNewsWorld.

"It will take some time for TMobile to get its lawyers in touch with Apples lawyers," he remarked, "but in the meantime, they will continue to sell the iPhone under the current arrangement."

Another German mobile phone operator, Debitel, announced that it also has filed a complaint with the countrys regulators about the TMobile iPhone contract, according to press reports.  Phone Card News Stats


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