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Sprint won't profit from carrying Apple's iPhone until 2015, has no regrets

post #1 of 34
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Sprint's CEO views his company's up front payment to offer the iPhone as a long-term investment that won't see any returns until 2015.

Sprint is estimated to spend $15.5 billion on the iPhone over the next four years, but by 2015 its investment will be "quite profitable," CEO Dan Hesse said during his company's shareholder meeting on Tuesday, according to All Things D. He added that he and his company are "very happy" with Sprint's deal with Apple.

"We believe in the long term," Hesse said. "And over time we will make more money on iPhone customers than we will on other customers."

Hesse has found himself under fire from some shareholders who believe Sprint's iPhone deal with Apple is not ideal for the carrier. That prompted him to return $3.25 million in compensation last week, after some expressed dissatisfaction that Sprint had excluded the financial effect of carrying Apple's iPhone when calculating employee bonuses.

It was reported last year that Sprint agreed to purchase 30.5 million iPhones from Apple for nearly $20 billion over the next four years. The Wall Street Journal characterized the deal as a move that "bet the company" on the iPhone.

iPhone 4S


Hesse believes the major upfront investment taken by Sprint to offer the iPhone will pay for the company in the long term, bringing in higher value customers to the third-largest carrier in the U.S. The carrier sold 1.5 million iPhones in the first quarter of calendar 2012, and another 1.8 million in the holiday quarter that concluded 2011, and more than 40 percent of those sales were to new subscribers.

Sprint's investment has been made on the belief that iPhone users are "more profitable" than other customers, such as those who buy smartphones running the Google Android operating system. Hesse previously said that iPhone users use less data on average than other smartphone customers, which costs network operators like Sprint less money.
post #2 of 34
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Originally Posted by AppleInsider View Post

Sprint's CEO views his company's up front payment to offer the iPhone as a long-term investment that won't see any returns until 2015.
Sprint is estimated to spend $15.5 billion on the iPhone over the next four years, but by 2015 its investment will be "quite profitable," CEO Dan Hesse said during his company's shareholder meeting on Tuesday, according to All Things D. He added that he and his company are "very happy" with Sprint's deal with Apple.
"We believe in the long term," Hesse said. "And over time we will make more money on iPhone customers than we will on other customers."

I see that Hesse is putting off the date the iPhone deal should become profitable. Just a week ago it was 2014... at this rate, he would retire before Sprint sees any profit...

post #3 of 34

Dan's the Man! Good for Sprint, and most of us is really rooting for them. We can't be stuck with the other two giant price-gauging telcos. 

post #4 of 34
Sprint is making a long-term investment that should pay big profits in the future. Glad the CEO is ignoring the get-rich-quick naysayers.

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post #5 of 34
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Originally Posted by docjrey View Post
...
We can't be stuck with the other two giant price-gauging telcos. 

True that; but don't forget http://www.t-mobile.com/

post #6 of 34
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Originally Posted by jd_in_sb View Post

Sprint is making a long-term investment that should pay big profits in the future. Glad the CEO is ignoring the get-rich-quick naysayers.

It is paying big profits now, just not for Sprint.

post #7 of 34
Quote:
Originally Posted by DrDoppio View Post


I see that Hesse is putting off the date the iPhone deal should become profitable. Just a week ago it was 2014... at this rate, he would retire before Sprint sees any profit...

 

How is he putting off the date?  The article you linked says the he predicted Sprint would loose money until 2014.  This article says quite profitable in 2015.  There is a break-even point and a period of low profitability.  Looks like he expects the cash-cow years to start in 2015.  I don't see how he contradicted himself.

 

Your posts on that article and today's article seem to indicate that you really want Sprint to fail.  Why?

post #8 of 34
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Originally Posted by BigBillyGoatGruff View Post

 

How is he putting off the date?  The article you linked says the he predicted Sprint would loose money until 2014.  This article says quite profitable in 2015.  There is a break-even point and a period of low profitability.  Looks like he expects the cash-cow years to start in 2015.  I don't see how he contradicted himself.

 

Your posts on that article and today's article seem to indicate that you really want Sprint to fail.  Why?

So, lose money until 2014, make a small profit in 2014, and be quite profitable in 2015? Sure, I can buy that.

 

I don't want Sprint to fail, but I think they made a bad move with "betting the company". I have previously expressed my amusement at the fact that struggling companies pour money into Apple's coffers.

post #9 of 34

At least they're not Samsung.

 

Samsung's Market Cap Takes $10 Billion Hit Amid Rumors of Apple DRAM Deal with Elpida

 

http://www.macrumors.com/2012/05/16/samsungs-market-cap-takes-10-billion-hit-amid-rumors-of-apple-dram-deal-with-eloped/

 

 

 

LESSON: DON'T F__CK with Apple.

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post #10 of 34
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Originally Posted by FriedLobster View Post
LESSON: DON'T F__CK with Apple.

 

Real lesson: Don't trust DigiTimes. lol.gif

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Even if [the 5.5” iPhone exists], it doesn’t deserve to.
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post #11 of 34

heh yeah.

 

it's also on Reuters (citing the same Digitimes source).

 

http://www.reuters.com/article/2012/05/16/us-samsung-chips-idUSBRE84F0BT20120516

 

 

But whatever. if it hurts Samsung im ok with it. 

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post #12 of 34
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Originally Posted by docjrey View Post

Dan's the Man! Good for Sprint, and most of us is really rooting for them. We can't be stuck with the other two giant price-gauging telcos. 

Sprint customer here. It's not really any cheaper than Verizon and AT&T. You get more minutes for the money but my bill is roughly the same as it would be if I were on one of the other carriers.

And their 3G speeds are lame. I'd gladly pay the $10 or so extra per month to get usable data. Soon as my contract is up I'm leaving.
post #13 of 34
Quote:
Originally Posted by DrDoppio View Post

So, lose money until 2014, make a small profit in 2014, and be quite profitable in 2015? Sure, I can buy that.

 

I don't want Sprint to fail, but I think they made a bad move with "betting the company". I have previously expressed my amusement at the fact that struggling companies pour money into Apple's coffers.

"Amusement"? What is so amusing about it? 

 

More important, what would you have them do? Continue to "struggle," but ignore Apple?

post #14 of 34
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Originally Posted by Tallest Skil View Post

 

Real lesson: Don't trust DigiTimes. lol.gif

 

THIS. lol.gif

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post #15 of 34
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Originally Posted by anantksundaram View Post

"Amusement"? What is so amusing about it? 

 

More important, what would you have them do? Continue to "struggle," but ignore Apple?

Why not negotiate better terms with Apple? I think selling 30 mln iPhones will be difficult for Sprint; I am not convinced that it will bring so much revenue either. We'll see.

post #16 of 34

I think the only regrets are from Sprint Customers.   See this link to their own internal forum.  Over 800,000 hits and counting...users are upset over their network.

 

 

http://community.sprint.com/baw/thread/78766?start=0&tstart=0

post #17 of 34
Quote:
Originally Posted by DrDoppio View Post

Why not negotiate better terms with Apple? I think selling 30 mln iPhones will be difficult for Sprint; I am not convinced that it will bring so much revenue either. We'll see.

So, you think that a struggling firm should "negotiate better terms with Apple"?

 

Nice to see that you can amuse yourself on such a thin premise. We all should be so fortunate.....

post #18 of 34
Quote:
Originally Posted by DrDoppio View Post

So, lose money until 2014, make a small profit in 2014, and be quite profitable in 2015? Sure, I can buy that.

I don't want Sprint to fail, but I think they made a bad move with "betting the company". I have previously expressed my amusement at the fact that struggling companies pour money into Apple's coffers.

Just curious what evidence you have to support that.

In the mobile business, it is very common for carriers to lock in customers for contracts and lose money for at least the first year and often the first year and a half - and then make an attractive return after that period. Sprint is taking a bit longer to recover their investment, but what makes you think that they won't come out ahead in the end? (especially when Sprint's CEO says that he has no regrets. What do you know that he doesn't?)
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post #19 of 34
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Originally Posted by noexpectations View Post

I think the only regrets are from Sprint Customers.   See this link to their own internal forum.  Over 800,000 hits and counting...users are upset over their network.

 

 

http://community.sprint.com/baw/thread/78766?start=0&tstart=0

LOL. There's the real reason for their struggles....

post #20 of 34
Quote:
Originally Posted by jragosta View Post


Just curious what evidence you have to support that.
In the mobile business, it is very common for carriers to lock in customers for contracts and lose money for at least the first year and often the first year and a half - and then make an attractive return after that period. Sprint is taking a bit longer to recover their investment, but what makes you think that they won't come out ahead in the end?

 

The mobile business is changing rapidly. In a span of 5 years smartphones are almost completely replacing feature phones. Apple is riding this wave and bringing in enormous profits. However, the market will sooner or later reach saturation. Telcos won't be getting so many new smartphone customers, and existing ones will be less likely to upgrade each year. In my opinion, Sprint is late to the iPhone party and will be left with a disproportionate bill. Time will tell.

post #21 of 34

Well flip my lid! Long term planning by a company? The shareholders won't be happy! ;-)

post #22 of 34
Quote:
Originally Posted by DrDoppio View Post

The mobile business is changing rapidly. In a span of 5 years smartphones are almost completely replacing feature phones. Apple is riding this wave and bringing in enormous profits. However, the market will sooner or later reach saturation. Telcos won't be getting so many new smartphone customers, and existing ones will be less likely to upgrade each year. In my opinion, Sprint is late to the iPhone party and will be left with a disproportionate bill. Time will tell.

OK. So you don't have any evidence to support your claims that Sprint made a mistake. I didn't think so.

But what would you expect from Dr. Dopey?
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post #23 of 34
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Originally Posted by jragosta View Post


OK. So you don't have any evidence to support your claims that Sprint made a mistake. I didn't think so.
But what would you expect from Dr. Dopey?

What is your problem? Do you have a better prediction about how well Sprint will be doing three years from now? If so, let's hear it, if not, go pound sand.

post #24 of 34

That is a good thing.  A CEO who is focusing not on the next quarter or year but on the medium-to-longer term.  No wonder Wall Street is unhappy!

post #25 of 34
Quote:
Originally Posted by jragosta View Post

...especially when Sprint's CEO says that he has no regrets. What do you know that he doesn't?)

Because all CEOs are honest to their word & would never stretch facts to save them or their company… just sayin'

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post #26 of 34
Quote:
Originally Posted by DrDoppio View Post

The mobile business is changing rapidly. In a span of 5 years smartphones are almost completely replacing feature phones. Apple is riding this wave and bringing in enormous profits. However, the market will sooner or later reach saturation. Telcos won't be getting so many new smartphone customers, and existing ones will be less likely to upgrade each year. In my opinion, Sprint is late to the iPhone party and will be left with a disproportionate bill. Time will tell.

This ignores several key factors

*How long will the conversion from feature phones to smartphones will take. "almost completely" is a relative term. I think there will be plenty of people still converting by 2015, especially since I'm certain such a conversion takes longer in a down economy.

*Global economy. Plenty of developing nations will be in the market for smartphones in the coming decades.

*We still have a generation of people alive who use landlines. Some of them have cell phones, but most are uncomfortable with anything beyond a feature phone. The generation following them will naturally have feature phones, but with many stalwarts who will never upgrade to smartphones. The generation behind them will naturally have smartphones. This is a long process we are discussing.

*People have babies. Babies grow up and get phones. There will always be new subscribers.

Saturation is theoretically possible, but not happening a) anytime soon and b) not as long as the population is growing.
post #27 of 34
Quote:
Originally Posted by DrDoppio View Post

What is your problem? Do you have a better prediction about how well Sprint will be doing three years from now? If so, let's hear it, if not, go pound sand.

I can guarantee that the CEO of Sprint knows more about their business than you. If you want someone to believe your assessment over his, where's your evidence?

And I'm not the one making the prediction, so there's nothing for me to provide.
Edited by jragosta - 5/16/12 at 2:34pm
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post #28 of 34
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Originally Posted by halfyearsun View Post


This ignores several key factors
*How long will the conversion from feature phones to smartphones will take. "almost completely" is a relative term. I think there will be plenty of people still converting by 2015, especially since I'm certain such a conversion takes longer in a down economy.
*Global economy. Plenty of developing nations will be in the market for smartphones in the coming decades.
*We still have a generation of people alive who use landlines. Some of them have cell phones, but most are uncomfortable with anything beyond a feature phone. The generation following them will naturally have feature phones, but with many stalwarts who will never upgrade to smartphones. The generation behind them will naturally have smartphones. This is a long process we are discussing.
*People have babies. Babies grow up and get phones. There will always be new subscribers.
Saturation is theoretically possible, but not happening a) anytime soon and b) not as long as the population is growing.
  • "almost completely" is a relative term, so is "plenty of people";
  • developing nations are irrelevant to Sprint;
  • generation change is slow and much less of a factor with rapidly changing technology;
  • population growth -- see above.

 

So yeah, there are factors with positive effect, but those are ripples on the surface during the ebb tide.

 

Let me add that the next iPhone will likely be LTE-capable, so Sprint will be put in disadvantage once again. I would have invested some of the billions they gave to Apple for iPhones into replacing their network technology instead.


Edited by DrDoppio - 5/16/12 at 3:07pm
post #29 of 34
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Originally Posted by DrDoppio View Post

Let me add that the next iPhone will likely be LTE-capable, so Sprint will be put in disadvantage once again. I would have invested some of the billions they gave to Apple for iPhones into replacing their network technology instead.

Still waiting for you to explain to us why you know more about Sprint's business than the CEO.

And I doubt if they 'gave' billions to Apple. They signed a multibillion dollar agreement to purchase iPhones. From everything I've read, that's a standard purchase agreement. Apple ships phones to Sprint and then sends an invoice. Sprint pays the invoice after 30 days or whatever terms they worked out. That agreement is spread out over several years and Sprint will be receiving revenues over that same time frame.
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post #30 of 34
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Originally Posted by jragosta View Post


Still waiting for you to explain to us why you know more about Sprint's business than the CEO.

 

Of course he knows more about Sprint's business, that's his job, not mine. Whether he's telling us all that he knows is another matter. Who do you think has a bigger incentive to paint a rosy picture?

 


And I doubt if they 'gave' billions to Apple. They signed a multibillion dollar agreement to purchase iPhones. From everything I've read, that's a standard purchase agreement. Apple ships phones to Sprint and then sends an invoice. Sprint pays the invoice after 30 days or whatever terms they worked out. That agreement is spread out over several years and Sprint will be receiving revenues over that same time frame.

 

So what happens if Sprint cannot sign up 30 million people for the iPhone in four years? Will Apple say "Fine, you did your best, forget about it"? Or will they expect Sprint to pay according to the agreement?

post #31 of 34
Quote:
Originally Posted by DrDoppio View Post

Of course he knows more about Sprint's business, that's his job, not mine. Whether he's telling us all that he knows is another matter. Who do you think has a bigger incentive to paint a rosy picture?

You do know that lying about a material matter is a felony for the CEO of a public company, right? So if you're going to accuse him of lying, you'd better have some real evidence.

Sorry, but I'll take the word of a CEO who is legally and morally bound to tell the truth about his company over a dopey anonymous troll on AI.
Quote:
Originally Posted by DrDoppio View Post

So what happens if Sprint cannot sign up 30 million people for the iPhone in four years? Will Apple say "Fine, you did your best, forget about it"? Or will they expect Sprint to pay according to the agreement?

I don't know - I haven't seen the agreement. Have you?

In any event, the CEO has seen the agreement and he's comfortable with his position. So, once again, what evidence do you have that he's lying or has created an unreasonable level of risk for Sprint?
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post #32 of 34
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Originally Posted by jragosta View Post


You do know that lying about a material matter is a felony for the CEO of a public company, right? So if you're going to accuse him of lying, you'd better have some real evidence.
Sorry, but I'll take the word of a CEO who is legally and morally bound to tell the truth about his company over a dopey anonymous troll on AI.
I don't know - I haven't seen the agreement. Have you?
In any event, the CEO has seen the agreement and he's comfortable with his position. So, once again, what evidence do you have that he's lying or has created an unreasonable level of risk for Sprint?

 

By all means, suit yourself, take whichever word you like.

post #33 of 34
Quote:
Originally Posted by DrDoppio View Post

  • "almost completely" is a relative term, so is "plenty of people";
  • developing nations are irrelevant to Sprint;
  • generation change is slow and much less of a factor with rapidly changing technology;
  • population growth -- see above.

So yeah, there are factors with positive effect, but those are ripples on the surface during the ebb tide.

Let me add that the next iPhone will likely be LTE-capable, so Sprint will be put in disadvantage once again. I would have invested some of the billions they gave to Apple for iPhones into replacing their network technology instead.

• that is correct. But it does not alter or invalidate my point
• it doesn't matter if developing nations are irrelevant to sprint. There is still room to grow, regardless of who chooses to take advantage of it
• the fact that generation change is slow only buttresses my point that the move to "saturation" will also be slow

I'm not saying that they will have a positive effect on Sprint. I'm saying that the idea of saturation is flawed
post #34 of 34

You're right about that.  Investors aren't too happy about Apple's long-term planning, either.  In fact, Wall Street is practically saying Apple has $0 growth long-term.  If companies want to be supported by Wall Street they'd better only think weeks in advance.
 

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