The iPhone debuted in Europe today, positioning T-Mobile Germany and O2 U.K. to bask in the same subscriber boom AT&T enjoyed in the U.S. five months ago. But both operators can also expect to face the same challenges as AT&T’s iPhone launch, and some new ones as well. According to Ovum, significantly low EDGE penetration in the UK, coupled with the elevated cost of the handset and the required 18-month contracts, will test the operators’ strength from the get-go.

“O2's EDGE coverage in the U.K. is currently at a rather woeful 30%, and although it has pledged to increase this, it will take both time and a considerable investment,” said Ovum analyst Johathon Arber. “When you consider that sales and support investment will also be needed, it is taking quite a gamble on the iPhone's success."

O2, boosted by its current leading position in the U.K. in terms of connections and non-voice ARPU, may feel it’s ready for the challenge. Its market position makes the company a good fit for a device such as the iPhone that focuses so heavily on messaging and Internet services, Arber said, noting that O2 is offering the iPhone with an unlimited mobile data tariff.

“We would argue that this is a great way for it to raise awareness of mobile data tariffs among its customers,” Arber said. “Even if they do not buy an iPhone, the buzz surrounding it may arouse their interest in the mobile Internet. However, we think the strongest benefit for O2 is that the iPhone acts as a key differentiator in a market that has recently seen fierce competition on acquisition and retention."

The expensive price of the phone itself, coupled with the contract, may be enough to turn away some buyers, Arber said. The phone retails for €399 (U.S. $557) in Germany and £269 ($536) in the U.K. with a minimum 18-month contract.

"The relatively expensive contracts on offer with the iPhone will represent an attractive revenue stream over 24 months, but the high up-front and monthly cost and long lock-in could put off some users in a market where free handsets are the norm,” Arber said.

On the German-front, as T-Mobile launches the iPhone at more than 700 stores, competition from all sides of the market is running high. Vodafone is leading in the post-paid segment with a higher ARPU and non-voice revenues.

“[T-Mobile] needs to fight back, and the iPhone may well allow it to do so,” Arber said. “Not only does this put it back in the headlines, it offers it the opportunity to use its EDGE network with 100% coverage to its fullest potential, and generate a decent ROI.”

Arber’s note of caution to both O2 and T-Mobile was to ensure they derive the maximum benefit from the initial burst of momentum the iPhone launch provides, while also keeping a close eye on the “grey market” to make sure their exclusive partnership retains its exclusivity.

“Unlocked iPhones are already starting to be offered by some UK dealers, and while Apple and the operators have been careful to stress that these devices will not offer the same experience as an official iPhone, we still expect to see many more over the coming weeks," he said.