By Josh Ong

Published: 10:45 PM EST (07:45 PM PST)

France Telecom CEO Stephane Richard said in a recent interview that Apple has agreed on a compromise with wireless carriers to use a smaller SIM card instead of an e-SIM in order to make the next-generation iPhone even smaller and thinner.

Richard heads the second highest network of iPhones in terms of traffic, behind only AT&T. France Telecom sells the iPhone in 15 countries under the Orange brand.

In an interview last week with All Things D, Richard said that wireless operators have convinced Apple to hold off on implementing an e-SIM project.

"All of us told [Apple] it was a bad idea because the SIM card is a critical piece of the security and authentication process," Richard said. "It would be very difficult for a telco or carrier to manage the customer relationship. I think that they understood this point. We had a very constructive exchange and dialogue with them," he said.

Last year, reports emerged that Apple was working on an embedded SIM chip with an upgradeable flash component. However, European carriers, including France Telecom, were quick to voice concerns over the new technology, reportedly threatening to do away with subsidies for the iPhone if Apple were to move forward with the e-SIM.

According to Richard, a compromise has been reached between Apple and the carriers, resulting in a new SIM card standard even smaller than the micro-SIM used in the iPhone 4. Last week, another executive at Orange indicated that Apple had submitted a new SIM form factor to the European Telecommunications Standards Institute.

Apple's efforts to redesign the SIM card are apparently part of its ongoing quest to free up space in the iPhone and reduce the device's size. "We are going to work with them in order to standardize a new format of SIM which takes into account our needs with security and authentication and also is compatible with their wishes in terms of size," Richard said.

"I understood that the next iPhone would be smaller and thinner and they are definitely seeking some space," he added.

Wireless carrier executives have been a source of iPhone-related leaks in the past, though some executives have had to rescind their remarks. In April, a Verizon executive claimed Apple's next iPhone will be a GSM-CDMA world phone.

Apple has also been rumored to retaliate against carriers who leak news. Last year, the president of a Canadian wireless operator claimed Apple would launch a new iPhone in June. Though the executive said his carrier would receive the iPhone 4 in July of last year, the company only began selling the smartphone last month, prompting speculation that Apple had punished the carrier for revealing the release date.

During the interview, Richard also commented on Apple's rivals. Microsoft and Nokia will have a difficult time reversing negative market trends, he said. On the other hand, Research in Motion is not "really declining," but has quality issues that it needs to address.

Richard said Orange is "quite happy with the existing landscape in terms of operating systems," adding that “a world with 90 percent of Android-based devices would not be attractive for us, but we are far from that.”

Richard also express skepticism about the world market for tablets. "To me as a user and as a partner, there is the iPad and there is the rest. I think there will be a world market for the iPad. What will be, really, the size of this market, is difficult to say, because in fact it is a new market."