Did Sprint Sell Its Soul for the iPhone?

By  |  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.

 
8 Comments


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8 Comments For This Post

  1. JohnFen Says:

    Nope, no iPhone for me. It just doesn’t meet my needs.

  2. Mark Hernandez Says:

    The title of this article really rubbed me the wrong way, and you know what I mean.

  3. MJPollard Says:

    Didn’t anyone at Sprint watch “The Twilight Zone”? If they had, they’d have known that deals like this never work out in the end.

  4. Nick Says:

    I think Sprint's unlimited plans make it pretty relevant against its larger competitors.

  5. Ed Oswald Says:

    No, actually I don't.

  6. Tom Ross Says:

    I think unlimited data is not relevant for 8 out of 10 consumers. Plus I think that a pledge to sell 30 million phones ( or 1.9 million per quarter) is not risky at all. Sprint is still more than half the size of Verizon and AT&T. AT&T activated 3.6 million iPhones last quarter. Verizon activated 2.3 million but did not have a $99 or $49 model yet. Both will have higher sales when new models come out. Over the course of the next 12 months average of 4 million per quarter for each of them is very likely. Then add future growth potential through smartphone proliferation and a growing line-up, and Sprint will likely sell more than 30 million iPhones over the next 3 years.

  7. jltnol Says:

    The bottom line is ALL cell carrier SUCK! Between spotty service and non-existant customer service, once you sign up, YOU have sold your soul to the carriers when you sign their contract.

    As long as profits are the main motivator for all businesses, the US will never have first class service in this or any other business sector.

  8. roger Says:

    I have sprint and I will be upgrading the best cell phone ever made.