Spanish Telecom giant Telefonica (TEF) announced today it will launch the much anticipated Palm Inc’s (PALM) Pre touch-screen smartphone in Spain on Oct 14. The device will be available on the company’s HSDPA wireless network and will be sold at a price of up to €219 (US$321). Customers on specific monthly service plan will get it free of cost. Telefonica will also commercially launch Palm Pre in the UK on Oct 16.

Telefonica announced in July that it has been awarded the exclusive right to distribute Palm Pre in select European markets. The company’s wireless subsidiaries O2 and Movistar will market the premium handset when it becomes commercially available. O2 received exclusive distribution right for Pre in UK, Ireland and Germany while Movistar secured exclusivity in Spain .

Like Apple Inc’s (AAPL) iPhone 3G and 3GS, Palm Pre is equipped with the most advanced cellular technology and embedded features available in the 3G handheld market today. The device is equipped with the ability to operate on multi-tasking environment running several applications simultaneously.

Palm Pre entered the US market in June on Sprint Nextel’s (S) network. Since its launch, the device has generated strong market response having sold 90,000 to 100,000 units in the first week of launch.

Telefonica’s Spanish and European wireless operations are currently struggling with declining revenues and lower subscriber growth levels as weak economic conditions across these key markets are affecting customer usage levels. Additionally, reduced tariff rates imposed by the Spanish and European regulations are tightening wireless revenue per user.

Palm Pre represents the second most significant handset deal for both O2 and Movistar as they are already the exclusive distributors of iPhone in Britain and Spain, respectively.

The ability to market two of the most sought-after handset brands will strengthen Telefonica’s competitive position over its biggest rival Vodafone (VOD), which sells the BlackBerry series of smartphones in Europe. Telefonica hopes to leverage Palm Pre’s multi-tasking functionality to increase minutes of use, thereby boosting revenue per user.

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