The newspaper said Apple is urging the carrier to adopt a subsidized pricing model after selling only 100,000 of the touch-screen handsets during the first four months -- a run rate just north of 825 units per day.
Although Orange's parent firm France Telecom reportedly denied that it would cut pricing, Apple's two other European wireless partners were recently compelled to instate significant cuts on their own iPhone offerings.
In a move allegedly aimed at clearing inventory of the current generation handsets ahead of 3G models, O2 this month dropped the price of the 8GB iPhone in the UK to 169 pounds from 269 pounds, while Germany's T-Mobile slashed the same model by 300 euros to 99 euros.
A report published Friday by UK's Times Online suggests that those European carriers will be forced to absorb the brunt of the cuts, which will translate into "significant losses."
"O2, which sells the phone in the UK, and T-Mobile, the German distributor, are said to have significantly overestimated the number of first version iPhones that would sell in Europe," the publication said.
The report cites Morgan Stanley analyst Katy Huberty as largely blaming the European mobile executives for the misstep, as they became over-excited as and got caught up in hype following the US iPhone launch last June:
"They had since had to take steps to shift stock on which they would now make a loss in order to clear the shelves for the new 3G iPhone, which is expected to be in greater demand in Europe than in the US because of the more advanced phone networks."
Citing its own sources, the Times also reported that Apple has placed an order with its Asian suppliers to produce 200,000 of the new 3G iPhones by the end of May, rising to 2 million - 500,000 per week - in June.
"With a four week lead time between production and placement, that would leave [Apple chief executive Steve Jobs] free to launch the device during an annual developers conference at which he usually speaks," the publication said.