By Chris Velazco
Sprint (S) is taking a huge risk by carrying the iPhone, if reports from the Wall Street Journal are to be believed. Details about Sprint and Apple’s quiet dealings have begun to emerge, and if true, the country’s third largest wireless carrier is stuck in a precarious position.
Sprint CEO Dan Hesse has reportedly told the company’s board of directors that in order to nab the iPhone, they would have to commit to purchasing at least 30.5 million iPhones over the next four years. It’s a huge investment by any stretch — WSJ pegs it at around $20 billion at current rates — but it’s made worse by the fact that Sprint will be locked into the purchasing agreement regardless of whether or not the iPhones actually sell. The board was said to have accepted Apple’s terms.
It’s a lot of units to move, certainly, but it’s not entirely impossible. A particular subset of Sprint customers have been clamoring for a taste of the Cupertino limelight for years, not to mention that Sprint’s commitment to their unlimited data offerings make it an attractive alternative for current iPhone users looking get more bang for their buck.
Here’s the kicker though: even if iPhone sales are strong, it’ll still be years before Sprint turns a profit. At $20 billion for 30.5 million units, the cost per device comes out to roughly $656. Sprint has long positioned themselves as more of a value carrier than their big rivals Verizon (VZ) and AT&T (T), which will only make it harder to recoup the losses from subsidizing iPhone prices.
Unfortunately, no mention was made of what iPhone Sprint would potentially be carrying. Rumors that Sprint would carry a version of the iPhone 5 have been making the rounds, and could help explain Sprint’s willingness to jump on the device even at such a high price. BGR claims that Sprint will be the exclusive carrier of the iPhone 5 (at least for a while), which is pretty out-there, but could be a huge coup for Sprint if true.
Though customers may rejoice at Sprint landing the iPhone, it may not be all sunshine and roses. In order to move that many iPhones, it’s completely possible that Sprint will begin to focus less on their Android lineup. It’s a shame, considering how strongly they’ve backed the Google OS, but them’s the theoretical breaks. The possibility of the iPhone 5 being a Sprint exclusive is also a bit odd to say the least, but that may not be all. Sprint’s exclusivity on the Palm Pre is often cited as one of many reasons for that device’s underwhelming life — but the iPhone is obviously an entirely different monster.
According to an unnamed source close to the situation, Sprint’s iPhone deal was a “bet-the-company kind of thing.” No kidding — a successful launch could be a new wind in Sprint’s sails, and could give the company some much needed momentum in comparison to the Big Two carriers. Likewise, an underwhelming launch that never picks up steam means that Sprint committed to a huge liability for almost nothing.
Sprint is said to be waiting until later this week to make their official iPhone announcement, but with less than 24 hours until Apple’s big event, we may hear more sooner rather than later.