By Ed Oswald | Monday, October 3, 2011 at 3:40 pm
Sprint needs something, anything, to keep it relevant. It is staring two huge rivals — Verizon and AT&T — in the face, and will become the odd man out if the AT&T merger goes through. So what is it to do?
If you believe what the Wall Street Journal is saying Sprint has done, you all but sell your company’s soul for the iconic iPhone.
Sprint is likely to lose money on the iPhone deal through at least 2014, the paper reports, but it seems to think that the device could be key in keeping the carrier relevant. The gamble carries a lot of risk: Sprint could find itself straddled by a costly deal that could bring the entire company down if it fails.
The four year deal is said to guarantee the purchase of 30.5 million iPhones over the period, costing some $20 billion dollars. Sprint would subsidize each handset to the tune of about $500, meaning it would take quite awhile to recoup the cost of providing the device.
Think about it for a second: as of last quarter, Sprint only had about 27.7 million postpaid subscribers. If you take it at face value, every single customer would have to convert to the iPhone, or at least half of the subscriber base would need to re-up with a new iPhone twice during the agreement period.
But to be completely fair, the Sprint deal is not unusual — it seems to be average of what Apple asks of its carriers. The Cupertino company asks for a good deal of leverage over its partners, and these folks willingly give it to them. Despite Android’s successes, individually the iPhone is still the single best selling handset.
Verizon and AT&T did not have such risk in taking on Apple, because they are so much bigger and had a larger margin of error. But because Sprint is so much smaller, the risks of missing targets when making such huge deals are far higher.
Will Sprint be able to do make this work? If it sticks to its principles, it very well could. Remember the carrier makes a big stink about unlimited data: if it holds itself to that, it would be the only US carrier to offer such a plan. AT&T got rid of its unlimited iPhone data plans in June of last year, and Verizon’s this past summer. That’s certainly an attractive selling point.
So here’s my question: if Sprint offers unlimited data plans similar to its current ones for the iPhone, will you bite? Or did the carrier make a misguided gamble here? Personally, I think it had to do something, but this may have been a step too far.