Sprint to ‘Bet the Company’ on iPhone
With the new iPhone coming out this week, Sprint Nextel Corp. is finally expected to gain access to a device it has long coveted—but at a staggering cost. — The No. 3 wireless company is making a multibillion dollar gamble that Apple Inc.'s gadget …
Context & Ripple Effects
The Wall Street Journal reported in August that Sprint would carry the next iPhone (sources pointed to an iPhone 5 deal); this week the device launches and the terms are out: a multibillion-dollar purchase commitment the paper frames as a 'bet the company' wager. The arc runs longer than that — back in October 2005 Sprint was positioning itself against Apple's iTunes music business, and six years later it is paying for the privilege of selling Apple's hardware.
First-order effects
- Sprint joins AT&T and Verizon as an iPhone carrier this week, closing the lineup gap that has pushed upgrade-hungry subscribers toward its two bigger rivals.
- The price of admission is a multibillion-dollar volume commitment to Apple before a single unit sells — a fixed cost Sprint carries regardless of how many iPhones it moves.
Second-order effects
- AT&T and Verizon lose the iPhone as a differentiator just as Sprint fights the proposed AT&T–T-Mobile merger it publicly warns would severely harm the company — the device strengthens Sprint's case that it can compete independently.
- Sprint's reportedly stalled fundraising of up to $600 million from Comcast, Time Warner Cable and Bright House for Clearwire's LTE transition gets more urgent if iPhone traffic lands on a network still mid-overhaul.
Third-order effects
- If volume guarantees become the standard entry fee for flagship handsets, device makers permanently capture a slice of carrier margin and sub-scale networks face a choice between balance-sheet risk and irrelevance.
- The pattern points toward further consolidation among smaller US carriers, since only scale lets a network absorb both the handset subsidies and the data load a top-tier smartphone demands.
The trend: US wireless carriers are trading guaranteed-purchase risk for access to Apple's handset, steadily shifting bargaining power from network operators to device makers.