Apple struggling to reach iPhone deal with European carriers

The report, issued Monday, notes that wireless provider Orange should be a shoo-in for the iPhone contract in Europe as it's the only operator with significant EDGE coverage in the region. "But early indications are that Apple may be forced to go retail-only in Europe," wrote analyst Avi Greengart.

Several European operators reportedly advised Greengart that they had spoken to Apple and found the company “unbelievably arrogant,” making demands that “simply cannot be justified, no matter how hot the product is.”

"Several were adamant that they will never offer the iPhone," Greengart wrote. Therefore, he suggested in his report that "early indications are that Apple may be forced to go retail-only in Europe."

As far as U.S. iPhone distribution goes, the Current analyst noted that for reasons he "cannot begin to fathom," Nokia and Sony Ericsson have left the high end consumer segment completely open for Apple.

"Other than productivity-oriented devices, there is basically nothing to buy above $199 at carrier retailers, where the vast majority of phones are sold," he wrote. "A receptive home market lets Apple figure out what works, and what doesn’t, before moving abroad."

Greengart attests that iPhone will need that incubation period because once it arrives in Europe and Asia, it will encounter serious, entrenched competition. Sony Ericsson’s W950, he noted, has offered European consumers a touchscreen smartphone with 4GB flash memory and music and Web capabilities – plus UMTS – for nearly two years.

Regardless of how insanely cool the iPhone’s user interface is, the analyst also said that some consumers will always gravitate towards phones with real buttons on them. But at the same time, he believes iPhone should still sell millions of units in the first six to nine months.

"I would consider anything above 1 million units of a $500 handset a smash hit, and it looks like Apple will sell considerably more — possibly many times that," the analyst wrote.

Those likely to adopt an iPhone when it goes on sale in the U.S. on June 29th generally fall within three separate groups, according to Greengart. There's the "The Apple Faithful," "People who want the latest 'it' thing," and "some mainstream consumers."

"There may be disagreement on the size of the first two groups, but not whether they’ll queue up to buy. If Apple sells just to them, it will have a solid hit on its hand," he wrote. "The third group, mainstream consumers, is quite controversial. This is where having actually used an iPhone — if only for a short while — colors my analysis."