O2 sneaks eagerly anticipated Palm Pre from under Vodafone's nose

Spain's Telefonica, which owns O2 in the UK, has suddenly appeared as the front runner in the race to sign the new Palm Pre exclusively - the phone launched in January in the US, to universal appeal, thought of as a major rival to the touch sensitive iPhone.

Until now Vodafone was seen as an almost certainty to sign the phone, and this looks like a last gasp bid by the company that already has the iPhone in Spain and the UK, to take a major iPhone rival away from Vodafone.

Vodafone was known to have the first shot at signing the iPhone, but shied away from the onerous terms that Apple insisted on. However Palm, which has just raised almost $90 million to see through its launch to the Pre, the phone which is supposed to save it from bankruptcy, is not so picky and would have settled for any large pre-order (no pun intended), to ensure its financial safety.

The news broke in the Spanish national press, and was only reported unofficially as a leak from Telefonica. The deal is that Telefonica will get the Palm Pre in Latin America, the UK and Spain, which will leave Palm looking for more exclusives in other parts of the world.

The Palm Pre should be now launched by Movistar in Spain, the brand that Telefonica bought from US operator Bellsouth which it now uses in all Spanish speaking countries. The phone is now expected in ll those territories before the Summer.

Earlier this week Palm issued a financial warning saying that its next financial quarter, which ended last week, was be even worse than expected because it had failed to get the Pre ready for launch with the US Sprint Nextel network. It's quarterly revenues will be almost halved the company said. However that version of the phone uses the CDMA technology, popular in the US and parts of Asia, not the GSM/HSDPA version that Telefonica would take, and this is expected to behave more predictably. That version of the Pre was only launched at the Mobile World Congress in Barcelona last month.

The deal with Telefonica may be more about how much money Palm is going to get up front to make the next quarter look good, rather than the most attractive deal long term.

Telefónica is currently the third largest cellular operator in the world and competes aggressively against Vodafone, which has the second largest number of customers and the highest revenue.

By Peter White