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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."

With Sprint's commitment to making unlimited data a priority for its customers (at a time when Verizon and AT&T 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.

Sources: Wall Street Journal, Bloomberg, Google Finance



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RE: Leave AT&T/Verizon
By Keeir on 10/3/2011 5:50:54 PM , Rating: 1
Errr...

Lets review:

Iphone order: 20+ Billion
Market Cap: ~8.5 Bullion
Yearly Revenue: ~32 Billion
Net Income: ~-3 Billion

Sprint is essentially in the position where it -must- do more than break even on new deal. I also think the assumption that each iphone sold --> 100 dollar profit is pretty optomistic.

If a large percentage of these iphone go to NEW sprint customers who also do not ABUSE the data plans, then I could see this working very well for Sprint. But if Sprint fails to move the Iphones (After all there are better phones and better networks) or if Data usage is abusive to the point additional capitol projects need to occur... this could essentially be the tipping point to failure of the company. Its not like with ATT a few years ago. If an iphone customer is unhappy with the Sprint Network, there ARE other options.


RE: Leave AT&T/Verizon
By retrospooty on 10/4/2011 9:36:48 AM , Rating: 2
You have to throw in the monthly revenue from the new customers with voice and data plans. It adds up fast.


RE: Leave AT&T/Verizon
By TheRequiem on 10/4/2011 11:38:05 AM , Rating: 2
Precisely, I don't see that input there in that mathematic formula. Carriers don't make the bulk of their cash from the phones, they make a very miniscule amount compared to what they make in 2 years of retaining that customer.


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