According to a report in The Times, Apple has begun talks with European carriers for the exclusive right to distribute the iPhone throughout the EU, and Telefonica looks to be the front runner. Telefonica owns O2 in the U.K. and is competing with T-Mobile, Vodafone and Orange, according to the report. Hutchison's 3G operation, 3 will be excluded from bidding for the rights, since the handset doesn't offer 3G support at this time. While the carriers aren't talking, the bit about excluding 3 on account of no 3G support may take the air out of rumors that the iPhone will support 3G in time for the European rollout. A handset with so much potential as an "Internet Communicator" is going to have some trouble gaining traction in Europe if it only runs on EDGE. Jobs mentioned in his keynote that 3G support was coming soon, but perhaps not in time for the European launch.

For more on the latest iPhone rumor mill:
- see this article in The Times (via Macworld)