Vodafone put off by Apple's demand for big iPhone slice

Apple is understood to be demanding that its European mobile phone partners hand over a significant proportion of revenues generated by the iPhone and restrict the content that users can access.

The portion of network revenues demanded by Apple is believed to have been behind Vodafone's decision not to sign up as the exclusive partner for the iPhone in the UK. That contract is understood to have been won by O2 although the mobile phone operator stressed that no deal has yet been signed.Shares in Vodafone were slightly lower yesterday as investors bemoaned the fact that it will not have the device - which is flying off the shelves in the US after launching last week. The iPhone is expected to launch in November in the UK through O2, in France with Orange and in Germany with T-Mobile.

The expected success of O2 in getting the iPhone is a boost for Carphone Warehouse. It fell out with Vodafone last year and no longer connects customers to contracts with the operator.

The technology market analysis group iSuppli estimates that Apple is making a profit of almost $334 (£167) on each 8GB iPhone, which retails at $499, not including the cost of distribution and development. The firm estimates that up to 4.5m iPhones will be sold this year and more than 30m by 2011. Apple's own online iPhone availability checker showed all its US stores had sold out yesterday.

But Apple is not just making money through sales. It is demanding a slice of the revenues the wireless networks make from usage of the device. It is also restricting content that can be accessed.

In the past, mobile operators have cajoled handset manufacturers into putting buttons on their phones that access the network's own internet portal, where users can download games or buy music. With the iPhone, however, all the power rests with Apple.