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Thursday, November 18, 2010, 06:10 pm PT (09:10 pm ET)

European carriers threaten Apple over embedded SIM option

Carriers in Europe are threatening to cut subsidies if Apple releases an iPhone with an embedded SIM card, a new report claims.

In October, reports emerged claiming that Apple has been working with Gemalto to develop an open SIM for integration into the iPhone. An embedded SIM card could allow customers to choose between competing carriers and activate service right from the Apple Store.

According to a Financial Times report, European wireless operators are riled up about that possibility. "The operators are accusing Apple of trying to gain control of their relationship with their mobile customers with the new SIM," wrote author Andrew Parker. With the embedded SIM, customers could insist on shorter-term contracts, using the ability to easily switch between carriers as leverage.

In response to the rumors, the carriers are "privately saying" that they could refuse to subsidize the iPhone if Apple goes through with an embedded SIM, Parker wrote. Among European operators, Vodafone in the UK, France Telecom and Telefónica in Spain are "known to have concerns" about Apple's interest. One European telecom senior executive said the new SIM could lead to a "war" between operators and Apple.

In just 3 years, Apple's iPhone has already shaken up the wireless industry, and a multi-carrier integrated SIM would cause further disruption for carriers. Bernstein analyst Robin Bienenstock told the Financial Times that an embedded SIM “could ultimately prove to be the first step in a process in which [the mobile operators] cede customer control to handset vendors like Apple, [and are] relegated to commodity capacity providers.”

That step, however, could cost Apple. Bienenstock estimated that Apple’s global iPhone sales could take a 12 percent hit if European carriers made good on their threats to drop subsidies for the handset.