Chicago (IL) - Apple’s iPhone will see its first serious competitor soon: T-Mobile preps HTC "Dream" for an October release and is expected to launch its own application store alongside the handset. However, the Dream faces an uphill battle, since first reports claim that the device lacks Apple’s appealing design and, if we believe these sources, the operating system is not as elegantly integrated with the handset as Apple’s OS X-based OS with the iPhone.

The first Android-powered mobile phone is just around the corner, but it looks like it won’t be an iPhone-killer. Lots of excitement was generated around new HTC "Dream" and spy photos were posted all over the web. Supposedly coming from an insider who has seen the prototype, the handset is apparently a hot item in Google’s cafeterias these days. A source "familiar with the product" told Silicon Alley Insider that although both the HTC phone and Google-made Android operating system are technically powerful, the interplay between the two isn’t as elegant as the combination of the iPhone hardware and OS X.

According to the source, the HTC prototype lacks Apple’s design and is described as "big and bulky." It has a full physical five-row keyboard that slides out underneath the screen, as shown in this YouTube video. The source also said that Android is extremely powerful but still less-elegant, with a user interface that cannot match the iPhone. Of course, these impressions have to be taken with a grain of salt since the source isn’t verified and the actual product may come in a different shape.

In the meantime, the New York Times claims that T-Mobile will be the first carrier to offer the HTC Android-powered handset in the U.S. as early as October, while a Christmas release is considered to be more likely. HTC recently denied claims of the phone being delayed. If the New York Times is right, T-Mobile and its parent company Deutsche Telekom could significantly improve their position among U.S. carriers: T-Mobile is preparing an App Store rival with an important detail: It will offer software for pretty much every mobile phone platform and handset, excluding the iPhone.

If T-Mobile in fact will be first to launch an Android handset and is able successfully pair it with its application store, it could become the first carrier in the world to challenge Apple’s iPhone platform with a more comprehensive entire ecosystem. However, any handset maker using Android may find it tough, if not impossible, to crack Apple’s unique vertical integration. At least one analyst expects Android to be short-lived as yet another mobile phone platform, proposing that Symbian and Android will merge into a single mobile phone platform.

But before that happens, there is no doubt that Google will throw a lot of weight behind Android. In an interview with CNBC this week, Google CEO Eric Schmidt said Google "can make more money on mobile than on the desktop, eventually."