By John Biggs
Call it a sort of a bear hug: Sprint (S), the also-ranniest of the also-rans in the carrier world, lost money selling phones that, on the aggregate gained them subscribers. It’s also Catch-22, a blindside, and a mess.
According to Sprint, the company reported a net loss last quarter while still selling 1.8 million iPhones and increasing their subscriber base by 1.6 million. How? The costs associated with provisioning and supporting these new phones drove operating losses to $438 million, up from $139 million in Q4 last year.
The company reported increased subscriber numbers – 55 million this year. Forty percent of Sprint iPhone buyers were new customers. They nearly doubled capital expenditures this year.
Sprint is in a strange place. Like T-Mobile, the company has always been overshadowed by the bigger guys and never gained traction after acquisition. While using ostensibly the same hardware, Verizon (VZ) has roundly trounced Sprint by advertising improved coverage and reception.
However, unlike T-Mobile, Sprint has the iPhone. This move – beyond any network improvements or handset acquisitions – is what’s keeping the company afloat. The net loss shown this year happened because Sprint was supporting the iPhone, a wild situation in which a company’s best-seller is actually dragging it down.
If the iPhone taught consumes anything it’s that mobile broadband is a right, not a privilege. The right to Instagram, Yelp, and browse all day and night is seemingly god-given and that same god knows that the iPhone hasn’t been useful for making calls these last few years. In short, we’re looking at a product that would upend any carrier’s view of the world, not just Sprint’s.
For decades, carriers worried about getting calls from point A to point B. Now they have to worry about tethering, massive data downloads to small devices, and always-on connectivity. They have to worry about angry Tweets, upset Facebook posts, and maintain gear that is cutting edge and prone to failure. So, in the end, it didn’t make financial sense to go the popular route, but hopefully it will buoy Sprint’s prospects in the long term.
The iPhone taught carriers that it wasn’t enough to dump out a feature phone or two and keep the power on in the switch room. Sprint’s troubles – masquerading as opportunity – is the finest example of the change that is currently rolling over the operator landscape.