Sprint goes all in on iPhone, commits to 30.5 million handsets
Sprint has committed to buying 30.5 million iPhones over the next four years, The Wall Street Journal reports. The company, which has not had a profitable year since 2006, is likely to initially lose money on the deal, which requires it to subsidize the cost of iPhones to Apple at $500 a pop. The hope is that it will help produce subscriber growth.
According to the WSJ’s article, Dan Hesse, Sprint’s CEO, described the plan to the company’s board in August. It will involve a long-term contract with Apple for its smartphones—a contract worth $20 billion at the phone’s current valuation. That will constitute a huge hit to the company’s operating revenue, an anonymous source said.
Hesse’s proclamation unnerved the board, but they agreed the company has few other options if it is to remain competitive with carriers that already offer the iPhone. Hesse stated at a conference last month that the iPhone is “the number one reason customers leave or switch” from Sprint.
While the company’s decision to buy iPhones that have not yet been invented seems risky, other carriers may be engaging in similar deals and successfully moving the phones. Even as the iPhone 4 and 3G S grew long in the tooth in the first half of this year, Verizon and AT&T sold 12 million of the handsets between them, and 128 million of the phones have been sold worldwide since 2007.
Selling 30.5 million iPhones in four years may be an optimistic goal, but it’s not impossible, particularly in light of Sprint’s service offerings. The company finished second to Verizon in customer satisfaction (though many of its customers only have pay-as-you-go service), and is the only remaining carrier that still offers unlimited data use. Its growing 4G network can serve that data at a fast pace.
Apple is expected to unveil the first handset that will fill out Sprint’s commitment at an event tomorrow. Stay tuned for Ars’ live coverage tomorrow at 10AM PDT.
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