Apple-Vodafone Euro Deal Imminent?

Sources say that Apple Inc. (Nasdaq: AAPL) and Vodafone Group plc (NYSE: VOD) are planning to announce a European iPhone deal within the next couple of weeks but are working to try and iron out some kinks with the device before launch.

Vodafone -- along with T-Mobile International AG in Germany -- has already been slated as one of the European mega-carriers likely to carry the iPhone. Now a source says that a deal could be announced very soon. (See iPhone Fever Hits Europe.)

Analysts are expecting that Apple will eventually strike a number of major carrier deals in Western Europe. "We have heard Vodafone, O2, and T-Mobile," says Gartner Inc. analyst Ken Dulaney, while noting that there are still many rumors flying 'round about the device.

"Not sure if Vodafone will cut the deal that AT&T cut," Dulaney adds. "We don't think they want to give up that much control." (See iPhone Revenues Flow in Three Streams.)

Another industry source says that Apple is trying to fix some bugs for Vodafone and other carriers and suspects that the carrier may announce the deal before it actually starts shipping the phone.

The source provided Unstrung with a partial list of iPhone enhancements carriers are looking for:

• YouTube Inc. : Apple only allows the YouTube application on the phone to do a one-word search. "Vodafone wants it to work much more like the Internet version."

• The Calendar sync to Microsoft Corp. (Nasdaq: MSFT): Outlook and Exchange email doesn’t work in most cases. "Apple doesn’t license the Microsoft Activesync technology, so there are many problems with those trying to make Outlook and Exchange work as claimed," says the source. "Vodafone, T-Mobile, and AT&T believe many users are high-end users that will demand that the Outlook and Exchange claims of Apple actually work. Right now, known problems include the inability for the iPhone to synch calendar items reliably."

• Security and firewalls: The VPN security doesn’t support MSCHP1 or other formats used by Cisco Systems Inc. (Nasdaq: CSCO). "The Cisco PIX firewall is one of the most popular in the world, and this oversight is causing people huge headaches."

• WiFi security. "Apple requires a '$' to be placed in front of WEP and WPA security keys for any access point that is not an Apple Airport" (i.e, most of the market). This isn't in the manual and isn't easy for the average user to understand anyway. "[Vodafone] wants Apple to rewrite the code to make it 'just work like any normal human would expect.' "

• Web browser improvements: The top complaint is the lack of "cut and paste": "This seems like a relatively easy fix."

"Not surpising about bug fixes," notes Gartner's Ken Dulaney. "No matter what Apple says, it's a first-generation OS."

Analyst Carmi Levy at AR Communications Inc. reckons Vodafone may also be looking for one further major upgrade from Apple for the iPhone toot sweet: "Vodafone has been leading the chorus of European carriers for Apple to bring a 3G-capable iPhone to market as soon as it possibly can.

"The carrier that lands the leading device -- iPhone -- on the fastest, most capable 3G infrastructure will score major market brownie points if AT&T’s experience in the U.S. is anything to go by. In AT&T’s case, its version of the iPhone didn’t -- and still doesn’t -- have 3G capability, but that didn’t seem to stop the masses from breaking down the carrier’s door."

— Dan Jones, Site Editor, Unstrung