Sprint’s CEO has told its Board of Directors that it will need to purchase 30.5 million iPhones over the next 4 years, reports the WSJ. The deal is said to run $20B, a figure that will keep Sprint in the red until 2014. This would equate to $655 per phone if taken as an average number, that would indicate that these would be higher-end models.
The publication cites sources familiar with the matter in saying that CEO Dan Hesse told the board in August that Sprint would likely lose money on the deal until 2014.
Mr. Hesse told the board the carrier would have to agree to purchase at least 30.5 million iPhones over the next four years—a commitment of $20 billion at current rates—whether or not it could find people to buy them, according to people familiar with the matter. In order to keep the price people pay for the phone low and competitive with rivals, Sprint would be subsidizing the cost of each phone to the tune of about $500, which would take a long time to recoup even at the high monthly fees iPhone users pay.
One person familiar with the decision said that the hit to the company’s operating income would be enormous and that “this is a bet-the-company kind of thing.”
The board was reluctant to approve the deal, wondering if the iPhone would still be popular in 2015. Hesse’s opinion was clear though as he told attendees of an industry conference that the iPhone was the “number 1 reason customers leave or switch” carriers.
Sprint is seen to have several advantages that could make it a more attractive option for refugees from other services. Among those are the fact that it persists in offering an unlimited data plan to its subscribers, a practice that AT&T and Verizon have ceased. Sprint also consistently earns very high network approval ratings from its customers, coming in roughly even with Verizon and far ahead of AT&T.
Immediately following this story, BGR also posted up a rumor that the iPhone 5 would be a Sprint exclusive. That is the redesigned iPhone 5 with a teardrop shape and a larger screen. This sounds patently ridiculous to us as having a next-gen iPhone on a carrier exclusive poses almost no benefit to us. Especially if the phone is a WiMax device, which is a failing standard that no one but Sprint uses and that even it has been considering ditching for LTE.
That being said, the news of Sprint buying heavily into the iPhone in a bid to save its business isn’t all that surprising. Whether or not it can pull it off is another story and will largely depend on user adoption and Sprint’s commitment to promoting the device as its ‘number one’ option.