BERLIN (Bloomberg) — Deutsche Telekom AG, Europe's largest telephone company, can block buyers of Apple Inc.'s iPhone from using the handset on competitors' networks, a German court ruled, overturning an injunction won by Vodafone Group Plc.

The Regional Court of Hamburg said in a statement yesterday it lifted an injunction obtained by Vodafone that stopped Deutsche Telekom's T-Mobile unit from selling the device only with exclusive contracts or software that restricted use on competitors' wireless systems.

The ruling reinforces Bonn-based Deutsche Telekom's efforts to boost its customer base and client spending with the iPhone. Vodafone, the world's largest mobile-phone company, trails market leader T-Mobile in German wireless subscribers.

"It's very important for Deutsche Telekom to win this ruling," Chris-Oliver Schickentanz, head of research at Dresdner Bank AG in Frankfurt, said in a phone interview. "Exclusivity is the key to a product like the iPhone because Deutsche Telekom's business model is to sell it at an unsubsidised retail price."

The court said Newbury, England-based Vodafone can appeal the ruling within one month. The company will analyse the written judgment and will then decide on further steps. "These sales terms are to the detriment of consumers and we wanted a court to review them," said Vodafone spokesman Jens Kuerten.

T-Mobile, the exclusive distributor of the iPhone in Germany, had changed the terms for selling the combined handset and iPod music player to comply with the November 21 injunction. The company will now scrap an unrestricted €999 ($1,500) iPhone offer it introduced following the initial court order.

"From the beginning we were very convinced that this was an offer that's absolutely fine from the legal side, and a really good offer for the customer," T-Mobile spokesman Klaus Czerwinski said in a telephone interview after the ruling.

Customers will now only be able to buy the phone under the original €399 offer with a binding two-year contract. After two years, users can have the iPhone unlocked so they can switch to other providers, T-Mobile said.

"The ruling is no surprise and I don't think Vodafone can change things on appeal," Marco Hartmann-Rueppel, a competition lawyer at law firm TaylorWessing, said in an interview. Unlike France, Germany has no law requiring companies to sell cell phones without contracts, he added.

"Two-year contracts are very common and it certainly helped that T-Mobile told the court that it will unlock the device at the end of that period," Hartmann-Rueppel said.

T-Mobile started selling the device on November 9. T-Mobile had 34.5 million customers in Germany at the end of September, compared with Vodafone's 32.5 million. T-Mobile sold more than 10,000 iPhones on the first day, which Deutsche Telekom chief executive officer Rene Obermann called a "promising start".