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Report: Sprint Makes Multibillion Dollar Bet on the iPhone

By Christina Bonnington
October 3, 2011 |
6:57 pm |
Categories: Telcos and ISPs
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If there’s one device that could save Sprint from a losing battle for customers with wireless giants Verizon and AT&T, it’s the iPhone.
Sprint CEO Dan Hesse told the company’s board that the carrier agreed to purchase 30.5 million iPhones over the next four years, according to a report from The Wall Street Journal. Today, a purchase of that size amounts to $20 billion US.
Such a large bet on Apple is telling of the drastic measures Sprint is willing to take in order to remain a contender in the wireless carrier arena. The purchase will take a huge chunk out of Sprint’s projected income, but perhaps could help the carrier bounce back after its merger with Nextel in 2005.
Sprint’s lack of carrying the iPhone has been the biggest reason customers leave or switch from Sprint’s network, the Journal reports Sprint CEO Dan Hesse saying. The carrier plans to subsidize each iPhone to about $500 in order to attract buyers and stay competitive with rivals. Currently on AT&T and Verizon an unsubsidized iPhone costs $650.
Spokespersons from Apple and Sprint declined to comment on the rumor.
AT&T was the first carrier to offer the iPhone since the device first launched in 2007, while Verizon joined the club earlier this year. Sales from the iPhone and iPad continue to provide Apple with record profits, which Sprint is hoping to take advantage of. The phone has continued to top the charts with regards to both sales and consumer satisfaction. Mounds of evidence have been stacking up that Sprint will get the iPhone come Tuesday’s press event.
Sprint needs a hit. The carrier’s stock has dropped 80 percent since the iPhone debuted on competing networks. Sprint currently serves only 52 million subscribers (Verizon, for comparison, serves over twice that many).
But now Sprint has a chance to bite into its larger competitors, as consumers will have a third option when it comes to choosing a carrier for their iPhone.
If the next iPhone is 4G, then Verizon, followed distantly by Sprint, would be the speediest option. Tests performed by RootMetrics found that Verizon’s 4G speeds were greater than 10 Mbps about 90 percent of the time, AT&T primarily achieved data speeds of 500 or less Kbps or 1.5 to 3 Mbps, while Sprint’s data speeds varied, but primarily fell in the 5 to 10 Mbps range.
After data-hungry iPhone users began clogging up their networks, both Verizon and AT&T abandoned unlimited data plans. AT&T’s biggest option for iPhone power-users, which provides 4 GB of data per month and unlimited calling and messaging, will currently run you $135 per month. On Verizon, you can get a plan with unlimited voice and messaging and 10 GB of data per month for $170 per month (but if you’re not going to be using data quite so much, it’s $30 to $50 less for a lower data plan).
Sprint, however, still offers an unlimited data package. The plan includes voice, SMS and data service for $100 a month plus a $10 smartphone fee. It’s still a pricey phone, but Sprint’s most expensive plan is still cheaper than comparable ones on AT&T and Verizon.