UPDATE 2-French watchdog suspends Orange iPhone deal

* Apple/France Telecom iPhone exclusivity deal suspended

* Watchdog says 5-yr deal "serious" competition threat

* France Telecom says to appeal

(Adds SFR plans to sell phones today)

By Matt Gil

PARIS, Dec 17 (Reuters) - The French competition watchdog suspended an agreement between Apple Inc (AAPL.O) and France Telecom (FTE.PA) tying the blockbuster iPhone 3G in France exclusively to customers of No. 1 mobile operator Orange.

The Competition Council said the decision would take effect from Thursday at the latest and was aimed at allowing customers to buy the device with a contract from rival operators SFR and Bouygues Telecom in time for the Christmas sales rush.

A spokesman for the second biggest player, SFR, owned by France's Vivendi SA (VIV.PA) and Britain's Vodafone Group Plc (VOD.L), said it hoped to start selling iPhones in the next few hours.

"We are going to contact Apple to set up a distribution contract," he said.

France Telecom said in a statement on Wednesday it intended to appeal against the decision as it "places France in a radically different position" than Britain, Germany and Spain, where Apple has also struck exclusivity deals.

The council said in a statement the five-year exclusive deal with Apple was "clearly excessive" and risked "serious and immediate damage to competition on the mobile market and to consumers".

A council official said an appeal against its decision, an "urgent" measure, and an in-depth examination of the agreement, would together likely take 12-15 months to complete.

France Telecom said the ruling was "serious" and "put the market economy into question".

France's No. 3 mobile operator, Bouygues Telecom, a unit of Bouygues SA (BOUY.PA) and the source of the Sept. 18 complaint over the Apple deal, said in a statement it hoped to start selling the iPhone as soon as possible.

Nobody at Apple France was immediately available to comment.

Based on average selling prices, the Competition Council said that on a "conservative estimate" Orange's sales of the high-speed 3G version of the iPhone totalled 220 million euros ($308.2 million) between its launch on July 18 and Nov. 5.