Orange will do its best to scoop up O2’s remaining first-generation iPhone customers when it begins shipping the latest models of the Apple device in November – 2 years since the first UK customers signed-up for 18- or 24- month deals to receive the device.

O2 is currently brazening out the new increase in competition out, saying it has “no plans” for price cuts, but we think these will be inevitable.

Also in the UK, Carphone Warehouse, which has held retail rights to sell iPhone beside Apple and O2, is now locked in negotiations with all three confirmed carriers to maintain that relationship, though it seems competing mobile retailer, Phones4U, is also vying for the trade.

Don’t underestimate the importance of the iPhone to Carphone Warehouse – the company has credited the device for helping it build its market presence at the cost of Phones4U. It is now close to inking a deal to sell Vodafone’s version of the device.

However, Orange has already agreed to allow Phones4U to offer the device, and may move to a multi-tiered strategy, also offering its version iPhone through Carphone Warehouse.

Current expectation is that Orange will bring the iPhone to the UK market at a £100 discount against O2’s price – that’s a discount on overall cost of ownership, including device purchase and monthly cost.

Orange and O2 will be battling head to head over the Christmas period when thousands of iPhone contracts will come up for renewal. Orange will likely trumpet the effectiveness of its 3G coverage outside the UK’s major cities when compared to O2 while it tries to secure those new iPhone customers.

While this is a particularly British story, Apple executives are likely to be watching how the market plays with interest as they consider whether or not to extend the much-criticised exclusive deal with AT&T in the US. Market behaviours in the UK may offer management an insight into likely consequences of opening its device up to more US networks, following an extended period of carrier monoculture.

*UPDATE: Since this appeared speculation has begun, suggesting Apple may be "throttling" iPhone 3G and 3GS supplies to O2, which has apparently sold out on iPhone 3GS AND iPhone 3G online and in shops. Carphone Warehouse appears to have stock.

An O2 spokesperson said the network will "continue to see extremely high levels of demand for the iPhone which means it comes in and out of stock very quickly and will be why the website hasn’t had any since Monday."


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