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Unlocked and pricey, iPhone is coveted in Israel

  • Story Highlights
  • Z-Tov sells the 8GB iPhone for about 2,000 NIS, or about U.S. $790
  • Apple has yet to make its presence official in Israel
  • In Israel, selling and unlocking the coveted iPhone is big business
  • Apple COO Tim Cook: Unlocked iPhones "a good problem to have"
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By Dana Rosenblatt
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TEL AVIV, Israel (CNN) -- In Tel Aviv's wholesale fashion headquarters, where textile merchants follow in the legacy of fathers and grandfathers, many Israelis are looking for the latest in tech fashion: the iPhone.

Mobile phone store Z-Tov Ltd. in Tel Aviv carries iPhones among other cell phones and products.

It's at Z-Tov Ltd. that consumers shop for the latest models of Samsung, Philips and Motorola. The local mobile phone chain even carries the 8GB and 16GB models of the highly coveted iPhone.

One customer asks the clerk whether the store sells the 16GB iPhone. But when he hears the price, the customer walks off in disappointment.

Z-Tov sells the 8GB iPhone for about 2,600 NIS, or about U.S. $753. The current market price in the United States is $399.

The store clerk says the store pays a 50 percent tax to import iPhones from outside the country.

But the price doesn't hinder iPhone's popularity here, appealing mostly to young men quick to upgrade their 8GB to a 16GB model as if memory size is a barometer of male bravado.

Apple has yet to make its presence official in Israel. The company has limited its iPhone products to four markets: the United States, the United Kingdom, Germany and France.

Still, as in other parts of the world, the iPhone has strong reception along Mediterranean shores.

The coveted phones make their way through customs in both official and unofficial passages; consumers buy them abroad for friends and acquaintances to resell on the gray market.

But before the phone can work on a local network, it must be unlocked or "jailbroken," tech lingo for reprogramming the iPhone to work on network carriers not affiliated with Apple.

Apple maintains strategic deals with several hand-picked wireless carriers; namely AT&T in the United States.

In order to protect these alliances, Apple issues this disclaimer to customers planning to reprogram the iPhone: Unlock at your own risk. The standard one-year warranty on jailbroken iPhones is null and void.

At Z-Tov, unlocking the iPhone is big business, and Arik Steinman's services are in high demand.

For 100 NIS (about U.S. $30), Steinman, a Russian immigrant, will unlock an iPhone in about 20 minutes, replacing the factory-provided SIM card with the customer's SIM of choice. For an extra 50 NIS (about U.S. $15), he'll change the language program to Hebrew.

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Steinman, who maintains a growing collection of unused AT&T SIM cards, said he unlocks an average of 30 to 40 iPhones a week.

Steinman has no formal technical background; he said he learned the technique through various sources. "In the beginning, it wasn't simple; now it is simple," he said with a smirk.

Last year, as many as 1 million iPhones may have been unlocked and activated by carriers not paying Apple a kickback, according to industry experts.

Anosh Ishak, a businessman and developer based in Atlanta, Georgia, said his iPhone is a "valuable business tool" that he uses on international trips, notably to Israel, where he'll pop out his U.S. SIM and replace it with one that will run on a local network.

Ishak said he paid $20 to a friend of a friend to unlock his phone so he can stay with his current phone carrier, T-Mobile.

When he purchased the iPhone from an Apple retail store in Atlanta, he made it clear he wasn't planning to sign on with AT&T.

"They told me that they wouldn't sell me the phone if they knew I was going to unlock it," Ishak said.

Determined, Ishak told the salesperson that he had the right to buy the merchandise and that the store could not control it.

How did the Apple salesperson respond?

"To tell me he'll pretend like he didn't hear it," said Ishak.

Apple representatives declined to comment on the unlocking phenomenon and iPhones making their way overseas, referring CNN to a Wired article that quoted Apple Chief Operating Officer Tim Cook speaking at the Goldman Sachs Technology Symposium in February.

Cook described the unlocked iPhones floating around the world as "a good problem to have," according to Wired, preferring to focus on Apple's 10 million quota -- even if it means doing away with its carrier exclusivity.

"The demand for the iPhone is so intense in the markets where we aren't offering it that people are exporting it out of the U.S. in many different ways and then running it on local carriers," Cook said.

"Of all the problems we face, this is the one I face looking at with a little bit of a smile. Because it means there's great demand for the phone. And to have people stepping over each other to have the phone isn't a bad thing," Cook said.

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