Apple do not want to cover a guarantee on the audio module failure I-Phone 4S

I subscribed to the AT&T phone service and got the I-phone 4S still under guarantee until May 10, 2013.
The problem started around December 09th, 2012 with:
- the ringer started to generate a loud popping sound at every ring when there are incoming calls,
- Later I discovered that the audio did not work for you-tube clips and Quicktime videoclips
- The screen blacked out during phone conversations (it did not happen before) so I cannot type a note or check email during the calls.
- During the phone conversation I cannot change the screen applications; as it is locked and blacked out.
I then brought the I-phone to the AT&T, who explained to me that the I-Phone technical problems must be handled by Apple, so I went to the Apple store in the South Center mall in Washington the same day, December 28th, 2012. The technician there told me to make an appointment.
On December 30th I went to the Apple store in Bellevue Square Washington, the first technician there told me that my I-Phone got “water damage”.  The second technician told me that it was not caused by water damage but there are too many issues going on at the same time, and possibly by resetting the I-Phone everything should be in order; to that all pictures and some of my data was lost during the reset process; but the problems remain and worsen:  My I-Phone intermittently shut itself down.
today Wednesday January 23, 2013 I return to the Apple store in Bellevue Square and meet with the technician Ian Cochran-Keith who diagnoses the issues; he mentions that my I-Phone connectors got “corroded” due to “water damage” and proposes to me two solutions:
- The audio module needs repair and the cost is 59$ but the issue could come back or
- Pay 199$ and get a new I-Phone.
(See attached note #3 from the technician)
I would like to present my formal request to Apple to honor the quarantee on my I-Phone and fix the issue of missing audio on videoclips also the screen black-out during phone conversation, beyond that the phone is working ok, I can still receive calls, make calls and other applications with Safari internet surfing .
I never have a problem with my I-Phone regarding any “water damage”.
What “Water Damage” the technician is reffering to?  Falling in water? Rain?
My phone was never exposed to rain or falling in any water or subject to any water contact since I got it, so what “water damage” the technician is referring to? 
If there is water damage I am certain that it wouldn’t work at all, I would get nothing.
I do not agree to pay for the audio module change or to pay for a new I-Phone as it is still under guarantee.
I expect Apple to reply to me with a favorable answer and fix my I-Phone per the guarantee
Sincerely
Note: This letter is copied to the www.bbbsilicon.org also to the consumer protection websites #43187808

I expect Apple to reply to me with a favorable answer and fix my I-Phone per the guarantee
They're not going to do it here. These boards are populated only with users, nobidy from Apple.

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