France Telecom SA's (FTE) Orange said Monday that it has reached an agreement to sell Apple Inc.'s (AAPL) iPhone in the U.K. later this year, bringing to an end a two year exclusive contract held by rival Telefonica SA's (TEF) O2 mobile network.

O2's exclusive deal with Apple has helped the company to boost sales, customers and average revenue per user, and catapulted the operator ahead of rival Vodafone Group PLC (VOD) into first place as the largest mobile network in the U.K. by subscriber numbers.

This first mover advantage won't be quite so strong for second-comer Orange, according to Geoff Blaber at CCS Insight, not least because the price has fallen in the two years since the original iPhone launched. However, Orange now has an opportunity to lure high-spending customers onto its network if the company is prepared to compete with O2 on price.

"If they decide to put a greater subsidy on the handset than O2, that could be a valuable tool to drive subscriber growth and attract customers from other networks," Blaber said, although that growth comes with higher subscriber acquisition costs.

No details of Orange's pricing or tariffs were released. O2 currently offers the highest specification iPhone 3GS on a sliding scale from GBP274 for the lowest tariff 18-month contract to free on the highest tariff 24-month contract.

Blaber believes Apple's move away from exclusivity means the remaining network operators, like Vodafone in the U.K., are likely to be in negotiations to sell the iPhone here, as well as in Germany, where Deutsche Telekom (DT) has an exclusive agreement, and in the U.S. where AT&T Inc. (T) is the sole supplier of the device.

Vodafone has previously expressed interest in stocking the iPhone.

A Deutsche Telekom spokesman said: "We have a long-term partnership [with Apple] that will last for several years."

AT&T declined to comment on its deal with Apple Monday, but is trying to extend its partnership beyond 2010, when its exclusive rights reportedly would end.

Apple said it was happy with the Orange deal and added that it also has an excellent relationship with AT&T which "we are very happy with." An Apple spokesman declined to comment further on its exclusivity plans for Germany and the U.S.

The iPhone's launch in 2007 heralded a new benchmark for touch-screen mobile phones and spawned an industry of mobile phone applications for sale and download from a host of vendors.

Apple Monday said more than two billion applications had been downloaded from its own App Store since it launched just over a year ago, and there are now more than 85,000 online applications available.

Although an exact date for the launch of the iPhone on Orange's U.K. network was not revealed, a spokesman for Orange said it would be available by Christmas.

The network will sell both the original iPhone 3G model and the latest iPhone 3GS version, which was launched in June and which offers a faster service with added features.

At launch, the new iPhone proved so popular that O2 sold out of the device, and the problem was compounded by a supply-chain issue during the early stages of the rollout.

These issues have now been resolved and right now the only item unavailable is the white iPhone 3GS, although the black version is in stock, an O2 spokesman said.

Commenting on the loss of exclusivity, the spokesman said the iPhone will continue to be available on the O2 network even after Orange starts to sell the device.

"We have well over one million customers with an iPhone, and a strong relationship with Apple which will continue," he added.

-By Kathy Sandler, Dow Jones Newswires; 44-207-842-9293; kathy.sandler@dowjones.com