June 26 (Bloomberg) -- Apple Inc. started the second phase of the worldwide release of the iPhone 3G S today as hundreds of people lined up in Japan and Australia to buy the handset.

Taisuke Fujimoto, 22, waited 21 hours to be first to buy the handset when Softbank Corp.’s store in Omotesando, Tokyo, opened at 7 a.m. local time to a line of about 300 people. Mina Abdallah, a 21-year-old engineering student, was the first customer to purchase the new iPhone at a SingTel Optus Pty store in Sydney after queuing for six hours.

“The touch screen, it just works. Then there are all the apps -- I just love it,” said Abdallah, who had bought the two earlier models of the iPhone. “If I had to go to the toilet, I had to hold it in.”

The latest model of the iPhone also goes on sale today in Austria, Belgium, Ireland and the Netherlands. The product, which debuted in eight countries including the U.S., France and German, on June 19 sold more than 1 million units on its opening weekend, beating some analysts’ estimates and keeping pace with sales of the previous model.

Still, the new iPhone, which features a video camera, compass and more memory, is facing stiffer competition from devices such as Palm Inc.’s Pre and Research In Motion’s Blackberry. The global recession will also damp demand for smart phones, handsets that can surf the Web and download games and software, this year, according to research firm IDC.

Steady Growth

“Sales of a typical phone model in Japan peak in two or three months: With the iPhone it’s steady growth,” Softbank President Masayoshi Son, 51, said at the event in Omotesando today. Son said advance reservations for the iPhone 3G S exceeded the company’s expectations. He declined to give a sales target for the model.

The features in the new iPhone model may not stir the same level of interest in Japan as the device garnered when first introduced in July 2008. At the time, more than 1,300 prospective buyers camped for as long as three days in advance, with the line stretching 800 meters, or half a mile, from Softbank’s flagship store.

Sales of the previous model in Japan reached about 700,000 units, according to Makio Inui, a Tokyo-based analyst at UBS AG. Credit Suisse Group AG’s Hitoshi Hayakawa estimates as many as 1 million iPhone 3Gs were sold in the country. Inui and Hayakawa expect sales of the new model in the next 12 months to fall short of those of its predecessor.

Replacement Demand

“It’s difficult to expect considerable replacement demand for the new model,” because most users buy the phones on a 2- year payment plan, said Hayakawa, a Tokyo-based analyst at Credit Suisse.

Bonnie Leung, a digital marketing professional who is buying her first iPhone, came to Apple’s flagship store in Sydney at 6:30 a.m. local time. Leung was among about 50 people queuing as the doors opened.

“I just wanted to get in line and get one and not be late for work,” she said.

The 32-gigabyte model costs 23,050 yen ($234) when purchased on a 24-month payment plan and the 16-gigabyte version sells for 11,520 yen, Tokyo-based Softbank, Japan’s third- largest mobile-phone operator, said earlier this month.

Japan Competition

The updated model will compete with 18 new handset models NTT DoCoMo Inc., Japan’s largest mobile-phone operator, plans to release this summer and 13 phones being introduced by KDDI Corp., the country’s second-largest mobile-phone operator. DoCoMo’s lineup includes a model running Google Inc.’s Android operating system, which offers many of the same functions as the iPhone.

Google’s Android, which allows for services such as downloading of new applications, surfing the Internet and navigation with street-level views, will run HTC Corp.’s Magic handset, DoCoMo said last month. The handset will go on sale in Japan in June or July for as low as 25,000 yen, it said.

“Japanese phones all have great video functionality, but the original iPhone didn’t and that made me hold off on buying one until now,” said Fujimoto, the college student who was first in line to buy the iPhone at Softbank’s store in Tokyo. “After watching the initial iPhone launch on TV last year, I was surprised to find that there was no one here when I arrived.”

To contact the reporter on this story: Pavel Alpeyev in Tokyo at palpeyev@bloomberg.net; Joanna Cooney in Sydney jcooney6@bloomberg.net.

Last Updated: June 25, 2009 23:28 EDT