Nov. 21 (Bloomberg) -- Deutsche Telekom AG, whose exclusive rights for Apple Inc.'s iPhone in Germany are contested by Vodafone Group Plc, said it will change some terms and let rival networks operate the handset.

Deutsche Telekom will offer the device for 999 euros ($1,477) without requiring a two-year exclusive contract with its T-Mobile unit, T-Mobile spokesman Alexander von Schmettow said by phone today. The original 399-euro offer with a binding contract remains valid, he said.

T-Mobile backed down after Newbury, England-based Vodafone, the world's largest wireless company, won a court injunction that bans T-Mobile from selling the iPhone with contracts or the so- called ``SIM lock'' that prevents the phone from working on another network. In France, laws stop France Telecom SA's Orange unit from selling the device with similar restrictions.

``How many people are going to spend 999 euros on a phone?'' said Carolina Milanesi, a research director at Gartner Inc., a research firm in Stamford, Connecticut. ``People are not used to spending that kind of money. In every single country now, people are going to look at the possibility of getting around the exclusivity issue.''

Unlocking Phones

German customers who bought the combination phone and iPod digital music player after Nov. 19, when the Hamburg court ruling took effect, can have their phones ``unlocked'' to work with another network operator, T-Mobile said in an e-mailed statement.

``Once the SIM lock is removed, the phone can be used with another network, although many of the functions will only be available to T-Mobile customers with a complete tariff package,'' the company said.

These features include Web-surfing on T-Mobile's network of 8,000 WiFi access points, and ``visual voicemail'' that allows users to call up messages without listening to previous ones. Monthly contracts range from 49 euros to 89 euros. The cheapest package includes 100 minutes of calling time and 40 text messages.

Apple spokeswoman Natalie Kerris declined to comment on T- Mobile's new offer. Vodafone spokesman Jens Kuerten called the additional 600 euros for an iPhone without a contract a ``penalty'' for German customers. ``We have to look into the details of their offer now and the possibility of customers unlocking the iPhone,'' Kuerten said by phone.

T-Mobile started selling the device on Nov. 9. The Bonn- based company has more than 34 million customers in Germany, Europe's largest wireless market.

France Telecom, Telefonica

T-Mobile sold more than 10,000 iPhone contracts on the first day, in what Deutsche Telekom Chief Executive Officer Rene Obermann last week called a ``promising start.''

In the U.K., Telefonica SA's O2 division won exclusive right to operate the iPhone. It started selling the device on Nov. 9 for 269 pounds ($553) with a mandatory 18-month contract. Orange will sell the handset in France starting Nov. 29. It hasn't said how much it will charge.

AT&T Inc. is the exclusive distributor of Cupertino, California-based Apple's iPhone in the U.S. Software locks the device to AT&T's service. To quash unauthorized use, Apple released an iPhone software update in September that rendered some unlocked devices inoperable.

Deutsche Telekom shares rose 1 cent to 15.11 euros on the Frankfurt exchange. Vodafone dropped 9.1 pence, or 4.7 percent, to 183.4 pence in London. Apple fell 39 cents to $168.46 in Nasdaq Stock Market trading at 4 p.m. in New York.

To contact the reporter on this story: Kenneth Wong in Berlin at kwong11@bloomberg.net.

Last Updated: November 21, 2007 16:27 EST