July 11 (Bloomberg) -- AT&T Inc. said a breakdown in Apple Inc.'s iTunes service prevented customers from activating their new iPhone 3G handsets today in its stores as planned.

``There's a worldwide issue with iTunes that Apple is working to resolve,'' AT&T spokesman Mike Coe said. ``While Apple is resolving the issue, we're telling people to sync up to iTunes later at home.'' AT&T, Apple's exclusive U.S. partner, began selling the new iPhone today at its more than 2,000 stores.

Both companies had said earlier this week they expected the purchase and activation process to take less than 15 minutes. Apple Chief Executive Officer Steve Jobs is selling the new phone, which is faster and has better audio quality, in almost four times as many markets as the original.

AT&T, the largest U.S. phone company, is seeing ``strong demand'' for the device and said some stores are sold out. Apple spokesman Steve Dowling didn't have an immediate comment.

The phone is now available in 22 markets, up from six, and Jobs plans to start selling it in 70 countries in the next few months. Today's debut drew thousands of shoppers in North America, Asia and Europe. Gene Munster, an analyst with Piper Jaffray & Co. in Minneapolis, estimates Apple may sell 4.08 million this quarter, which ends in September.

Apple, based in Cupertino, California, fell $4.05 to $172.58 at 4 p.m. New York time in Nasdaq Stock Market trading. Dallas- based AT&T dropped 19 cents to $32.58.

When the first model came out a year ago, Apple and AT&T had customers sign up for service and activate the handset at home. Making customers activate the phones in stores prevents them from unlocking the devices to work on unauthorized wireless networks or reselling them.

New Countries

Rogers Communications Inc., Canada's largest wireless carrier, asked employees to postpone buying iPhones so customers can get them first as the device sold out at stores in Ottawa and Halifax, Nova Scotia. Deutsche Telekom AG, Europe's largest phone company, said it sold more than 15,000 units of the new version on the first day as many shops ran out.

In the U.K., wireless provider O2 and Carphone Warehouse Group PLC said stores sold 40 iPhones an hour, which they said is more contracts than they typically sell in a day. O2 said it experienced ``technical difficulties'' with the computer system that Apple uses to connect customers to O2.

The device also sold out at many stores in Japan, with Bic Camera Inc. and Yodobashi Camera Co. saying they got rid of their entire inventories, estimated at more than 1,000 units for each of the chains, the Nikkei newspaper said.

``I don't like it. The whole world said they were arriving today, that they'd be everywhere, but they don't have them,'' said Sergio Valtierras, a 28-year-old marketing student, as he left a Telcel store run by America Movil SAB in Mexico City.

Global Ambitions

Apple introduced the iPhone in June 2007 and sold more than 6 million before running out of inventory in May. Jobs has said he plans to sell 10 million units this year to capture 1 percent of the worldwide mobile-phone market.

U.S. shoppers began buying the iPhone 3G, which works on speedier third-generation networks, at AT&T stores and Apple's 188 outlets as of 8 a.m. nationwide today.

U.S. customers will be able to check on inventory levels at Apple's stores at the company's Web site starting tonight, Apple retail chief Ron Johnson said in an interview this week.

``Our goal is to always have enough supply for every customer,'' he said.

To contact the reporter on this story: Connie Guglielmo in San Francisco at cguglielmo1@bloomberg.net

Last Updated: July 11, 2008 16:10 EDT