French mobile operator Orange admitted Wednesday that it has been struck a serious blow as the local Competition Council ordered the carrier to dissolve its exclusive iPhone contract with Apple.

Although legal challenges to Apple’s exclusivity contracts with mobile operators have been raised in the past, most notably in Germany, the French watchdog’s decision is likely to pave the way for similar decisions elsewhere.

In a nutshell, the iPhone will no longer be locked to the Orange network or sold exclusively by the mobile operator.

The Competition Council for its part, said that its decision was influenced by the fact that it believes France is a less competitive mobile market than some others.

France Telecom owned Orange said that it would appeal before the Court of Appeal in Paris.

The company said that after one year of its exclusive partnership, Orange will have sold over 150,000 first generation iPhones and over 450,000 3G iPhones. On a commercial level, the decision couldn’t have come at a worse time, with Christmas sales just reaching their peak.

“The Competition Council’s decision also undermines Orange’s efforts to develop high-speed mobile services in France. It is ironic that the operator which is most behind in terms of rolling out its 3G network initiated this complaint,” the company said, highlighting the root of the investigation as a complaint from third placed operator Bouygues Telecom.

“This decision is a serious blow. It calls into question the economic structure of the market and in particular, the different partnerships made between mobile operators and handset manufacturers working in the best interests of consumers and promoting innovation. By limiting all exclusive agreements to three months, operators will no longer be able to justify certain investments such as those made by Orange to launch the iPhone. These technical and commercial investments enabled Orange to offer a cutting-edge handset, coupled with innovative mobile Internet applications, to the wider public,” Orange said.