Quick Note: Sprint to "Bet the Farm" on Apple's Next Generation iPhone
October 3, 2011 4:40 PM
Sprint CEO Dan Hesse
(Source: Mark Costantini/The Chronicle)
Sprint is reportedly committing to purchase 30.5m million iPhones over the next four years
All signs are
pointing towards Sprint getting Apple's next generation iPhone
, and the official announcement will come tomorrow during Tim Cook's keynote address. However, the price that Sprint will have to pay to join the iPhone brotherhood in the U.S. -- along with fellow wireless carriers AT&T and Verizon -- will be tremendous.
According to the
Wall Street Journal
, Sprint has agreed to buy 30.5 million iPhones over the next four years from Apple. The price tag for Sprint is a whopping $20 billion USD. Sprint will be subsidizing the cost of each on-contract phone to the tune of $500.
Another risk for the copmany is the fact that Sprint won't even make any money on the deal until at least 2014.
Sprint CEO Dan Hesse approached Sprint's Board of Directors with the deal, and they were understandably hesitant about betting the company on Apple's smartphone prowess. But in the end, the Board felt that it was fighting a losing battle against larger rivals Verizon and AT&T which both have the iPhone. In addition, if AT&T's
planned acquisition of T-Mobile
were to be approved, its fortunes in the marketplace would be even more dire.
The board eventually decided, "How can we pass this up? We have to have it."
commitment to making unlimited data a priority for its customers
(at a time when
are putting bandwidth caps on users), such a deal could help bolster Sprint's survival chances in this cutthroat industry.
While Hesse and the Board are definitely onboard with the iPhone deal, investors are less thrilled. Sprint shares closed at $2.73, representing a 10.2 percent drop from the opening bell.
Wall Street Journal
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