iPhones May Hit Stores In Russia By Year's End

When Apple CEO Steve Jobs announced last week that the company would begin selling its high-speed iPhone 3G in 70 countries this summer, Russian fans were enraged that their country was conspicuously absent from the list.

But in a televised interview last week, Jobs offered what could be a bit of much-needed relief for iPhone lovers, saying the gadget could officially go on sale in Russia by the end of the year.

"We just didn't have a chance to close [a deal] with Russia. And I think you'll see [agreements] happen later this year," Jobs said on CNBC last week.

He said not having a distribution agreement with local mobile operators made it impossible for the coveted handsets to go on sale officially. In the absence of a distribution network, a flourishing black market for iPhones has sprung up in Russia, where there are already an estimated 300,000 users.

"About 20,000 iPhone handsets are brought into the country in suitcases every month," Eldar Murtazin, editor of Moscow-based Mobile Research Group said. "The current model, which sells officially in six countries for a marked-up $399, currently sells for about $1,000 in Moscow."

Two of the country's three leading mobile operators, Mobile TeleSystems and MegaFon, confirmed that they had held talks with Apple about iPhone sales but could not reach an agreement.

The problem hinges around the "disadvantageous conditions" that Apple was proposing, including a requirement that local operators buy iPhones wholesale from the company, Vedomosti reported last week, citing an unidentified mobile operator.

In addition, Apple wanted operators to pay 10 percent on every handset sold, as well as a monthly 10 percent of the revenue from service plans.

Jobs signaled last week, however, that Apple would abandon that approach and no longer require operators to share part of their subscribers' fees.

That may open the way for a breakthrough in talks with Russian mobile operators, Murtazin said.

Yekaterina Osadchaya, spokeswoman for VimpelCom, the country's second-largest operator, said Sunday that Apple's new strategy, including price reductions on handsets, would bring many Russian operators on board.

"VimpelCom is looking at the possibility of holding talks with Apple about a distribution agreement for the iPhones," Osadchaya said. "This is a very auspicious year for the handset in Russia because we are rolling out 3G technology in 20 cities this summer."

The new iPhone 3G, which will go on sale in the United States on July 11, will sell for $199 for the 8-gigabyte model and $299 for a 16-gigabyte model, Jobs said. The phone will be offered at a uniform price around the world, he said.

The 3G will offer significantly increased data transfer speeds, giving telephone users access to broadband Internet and streaming video. Analysts say the mark-up price in Russia is likely to be higher, however, because there is no contract-based handset subsidy system and the country's operators are not legally entitled to compensation if a subscriber breaches a contract.