Apple has begun talks with European mobile network operators, a report in The Times suggests.

The Times yesterday reported that Apple has been in discussion with Spanish telecoms firm Telefonica SA to license the telco with exclusive rights to distribute the new iPhone in Europe.

Telefonica SA owns UK mobile network O2. Vodafone, Orange and T-Mobile are all described as competing for the chance to distribute Apple's new 'must-have' handset.

The report also claimed that Hutchison's 3G operation, 3 will be excluded from bidding for the rights, as the iPhone doesn't offer 3G support at this time.

Telefonica SA has since declined to comment on the report.