Sprint buys 30.5M iPhones from Apple for $20B in 'bet-the-company' move

Posted:
in iPhone edited January 2014
Sprint has "bet the company" on Apple's iPhone, according to The Wall Street Journal, and has agreed upfront to purchase 30.5 million iPhones over the next four years, a commitment of nearly $20 billion.



Sprint Chief Executive Dan Hesse reportedly told his company's board of directors in August that Sprint will likely lose money on the mega-deal until 2014, but he is banking that the addition of the iPhone will help turn around the company that is the No. 3 largest wireless provider in the U.S.



"Mr. Hesse told the board the carrier would have to agree to purchase at least 30.5 million iPhones over the next four years -- a commitment of $20 billion at current rates -- whether or not it could find people to buy them, according to people familiar with the matter," the report said.



"in order to keep the price people pay for the phone low and competitive with rivals, Sprint would be subsidizing the cost of each phone to the tune of about $500, which would take a long time to recoup even at the high monthly fees iPhone users pay."



One person familiar with the company's approach says it's a "bet-the-company" level move that could make or break Sprint. It was the Journal that first reported in August that Sprint would offer Apple's fifth-generation iPhone at launch in the U.S. alongside competing carriers AT&T and Verizon.



Though the plan was initially met with concern by the board, they are said to have approved the massive $20 billion deal, dubbed the "Sony" project internally. Those on the board reportedly believed that Sprint would not be able to compete with AT&T and Verizon if it could not offer the iPhone.



Together, AT&T and Verizon sold nearly 12 million iPhones in the first half of 2011, and sales for Apple's handset continue to grow. The report noted it's possible that Sprint, which currently has 52 million customers, could conceivably sell all of the 30.5 million handsets if it were to capture a third of U.S. sales.



Sprint's apparent desperation was hinted at last month, when Hesse admitted that the lack of the iPhone is the "number one reason" that customers leave his company for competitors AT&T and Verizon.







For years, the iPhone was exclusive to AT&T in the U.S., but that changed this February when availability expanded to Verizon, the largest wireless carrier in the U.S.



The addition of Sprint would make Apple's hot-selling handset available on the three largest carriers in the U.S. That would only leave out T-Mobile among the "big four," though AT&T hopes to acquire T-Mobile with regulatory approval.



Executives at T-Mobile signaled last week that they will not have access to the iPhone 5 at launch, but also made clear that they hope a deal can be worked out with Apple to offer the company's smartphone. In a letter to the carrier's customers, T-Mobile's chief marketing officer suggested that customers take a close look at the carrier's lineup of Android-powered smartphones instead.
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Comments

  • Reply 1 of 180
    shenshen Posts: 434member
    Hard to see a move like this from any company for an Android phone...
  • Reply 2 of 180
    Typical Appleinsider news story



    1. Read article on the web

    2. Add a bit of context

    3. Profit



    Wish I thought of that first!
  • Reply 3 of 180
    jukesjukes Posts: 213member
    Quote:
    Originally Posted by AppleInsider View Post


    Sprint has "bet the company" on Apple's iPhone, according to The Wall Street Journal, and has agreed upfront to purchase 30.5 million iPhones over the next four years, a commitment of nearly $20 billion.



    Sprint Chief Executive Dan Hesse reportedly told his company's board of directors in August that Sprint will likely lose money on the mega-deal until 2014, but he is banking that the addition of the iPhone will help turn around the company that is the No. 3 largest wireless provider in the U.S.



    "Mr. Hesse told the board the carrier would have to agree to purchase at least 30.5 million iPhones over the next four years -- a commitment of $20 billion at current rates -- whether or not it could find people to buy them, according to people familiar with the matter," the report said.



    "in order to keep the price people pay for the phone low and competitive with rivals, Sprint would be subsidizing the cost of each phone to the tune of about $500, which would take a long time to recoup even at the high monthly fees iPhone users pay."



    One person familiar with the company's approach says it's a "bet-the-company" level move that could make or break Sprint. It was the Journal that first reported in August that Sprint would offer Apple's fifth-generation iPhone at launch in the U.S. alongside competing carriers AT&T and Verizon.



    Though the plan was initially met with concern by the board, they are said to have approved the massive $20 billion deal, dubbed the "Sony" project internally. Those on the board reportedly believed that Sprint would not be able to compete with AT&T and Verizon if it could not offer the iPhone.



    Together, AT&T and Verizon sold nearly 12 million iPhones in the first half of 2011, and sales for Apple's handset continue to grow. The report noted it's possible that Sprint, which currently has 52 million customers, could conceivably sell all of the 30.5 million handsets if it were to capture a third of U.S. sales.



    Sprint's apparent desperation was hinted at last month, when Hesse admitted that the lack of the iPhone is the "number one reason" that customers leave his company for competitors AT&T and Verizon.







    For years, the iPhone was exclusive to AT&T in the U.S., but that changed this February when availability expanded to Verizon, the largest wireless carrier in the U.S.



    The addition of Sprint would make Apple's hot-selling handset available on the three largest carriers in the U.S. That would only leave out T-Mobile among the "big four," though AT&T hopes to acquire T-Mobile with regulatory approval.



    Executives at T-Mobile signaled last week that they will not have access to the iPhone 5 at launch, but also made clear that they hope a deal can be worked out with Apple to offer the company's smartphone. In a letter to the carrier's customers, T-Mobile's chief marketing officer suggested that customers take a close look at the carrier's lineup of Android-powered smartphones instead.



    holy sh**
  • Reply 4 of 180
    At last, a carrier thinking outside their comfort zone. Nice marketing move.
  • Reply 5 of 180
    tallest skiltallest skil Posts: 43,399member
    Quote:
    Originally Posted by jukes View Post


    holy sh**



    Not a single reason that you needed to quote the whole thing. Or any of it, for that matter.
  • Reply 6 of 180
    sector7gsector7g Posts: 155member
    Quote:
    Originally Posted by ddawson100 View Post


    Typical Appleinsider news story



    1. Read article on the web

    2. Add a bit of context

    3. Profit



    Wish I thought of that first!



    this is apple rumor site. this is a rumor, what more do you want. i come here to find out whats going on with apple so i dont have to read all the other sites
  • Reply 7 of 180
    monstrositymonstrosity Posts: 2,199member
    Some web sources are saying Sprint has exclusivity. I call BS on that.
  • Reply 8 of 180
    stelligentstelligent Posts: 2,680member
    Quote:
    Originally Posted by Tallest Skil View Post


    Not a single reason that you needed to quote the whole thing. Or any of it, for that matter.



    Not a single reason you needed to say anything.
  • Reply 9 of 180
    lilgto64lilgto64 Posts: 1,147member
    Quote:
    Originally Posted by shen View Post


    Hard to see a move like this from any company for an Android phone...



    I am sure the Android fans will claim that Sprint is simply caving in to the media created frenzy in order to market an inferior product (the iPhone) and that only by shoring up their portfolio with the 87 different varieties of Android hardware and software combinations will Sprint survive or remain relevant in the US market. I mean, come on people, Android based devices have a larger screen, a removable battery, AND more buttons on the front than the iPhone, so they are clearly superior. Oh, and don't forget that you have the freedom to try to figure out just where the heck you are supposed to get apps to load on your Android device that are safe and won't be rendered obsolete in 3 months when the Tootsie-Pop version of the OS comes out - no, wait I mean the Fruit-Roll-Up version - no, no wait, the Pop-Tart version.



    Oh yeah - and Betamax is better than VHS, just you wait and see.
  • Reply 10 of 180
    Quote:
    Originally Posted by monstrosity View Post


    Some web sources are saying Sprint has exclusivity. I call BS on that.



    BGR, for one, is running with the exclusivity angle. As an out-of-contract AT&T subscriber (and frequent traveler to the land of no CDMA), I'd be pretty pissed if that were the case.
  • Reply 11 of 180
    adonissmuadonissmu Posts: 1,772member
  • Reply 12 of 180
    tallest skiltallest skil Posts: 43,399member
    Quote:
    Originally Posted by stelligent View Post


    Not a single reason you needed to say anything.



    Er? deal with it?



    The most important thing to consumers isn't having the iPhone on every carrier, it's having one iPhone for every carrier.



    When switching carriers because their service sucks doesn't require another $600 purchase, the telecoms will be forced to fight for our subscriptions.



    Until then, expect the same draconian plans, data caps, and throttling from every carrier the iPhone ever graces.
  • Reply 13 of 180
    Quote:
    Originally Posted by ddawson100 View Post


    Typical Appleinsider news story



    1. Read article on the web

    2. Add a bit of context

    3. Profit



    Wish I thought of that first!



    I check AI since they aggregate relevant news bits from around the web, but then i immediately click on the source link within the AI article to get the scoop. Otherwise I'm reading huge chunks of the source article masquerading on AI as original journalism.
  • Reply 14 of 180
    mstonemstone Posts: 11,510member
    In other news, Verizon to acquire Sprint for $14 billion.
  • Reply 15 of 180
    stelligentstelligent Posts: 2,680member
    Quote:
    Originally Posted by monstrosity View Post


    Some web sources are saying Sprint has exclusivity. I call BS on that.



    For this *rumor*, all so-called sources trace back to a WSJ article. WSJ tends to get accurate scoop when the 12th hour approaches. This also explains the pattern of *leaks* about 4S, to some extent.



    On the other hand, is $30B enough to buy Apple?



    I wonder if what Spring gets is an iPhone that looks different but otherwise has the same features and specs. Or, perhaps, it's a limited period of exclusivity (say 6 months).



    And, how does this shake out in other parts of the world?



    Regardless, if this is true, the center of gravity may be shifting.
  • Reply 16 of 180
    stelligentstelligent Posts: 2,680member
    Quote:
    Originally Posted by Tallest Skil View Post


    Er? deal with it?




    Exactly
  • Reply 17 of 180
    Maybe Sprint is getting the 4S models exclusively and Verizon and ATT get the iPhone 5
  • Reply 18 of 180
    stelligentstelligent Posts: 2,680member
    Quote:
    Originally Posted by smatanovic View Post


    BGR, for one, is running with the exclusivity angle. As an out-of-contract AT&T subscriber (and frequent traveler to the land of no CDMA), I'd be pretty pissed if that were the case.



    They got their story from WSJ, like everyone else.
  • Reply 19 of 180
    adonissmuadonissmu Posts: 1,772member
    Quote:
    Originally Posted by stelligent View Post


    For this *rumor*, all so-called sources trace back to a WSJ article. WSJ tends to get accurate scoop when the 12th hour approaches. This also explains the pattern of *leaks* about 4S, to some extent.



    On the other hand, is $30B enough to buy Apple?



    I wonder if what Spring gets is an iPhone that looks different but otherwise has the same features and specs. Or, perhaps, it's a limited period of exclusivity (say 6 months).



    And, how does this shake out in other parts of the world?



    Regardless, if this is true, the center of gravity may be shifting.



    If Sprint gets this then I will reluctantly go to sprint. I always thought AT&T had the best service ever. I really like my Iphone and will switch to have the new one.
  • Reply 20 of 180
    john.bjohn.b Posts: 2,717member
    If true, it's probably the safest "bet" they've ever made.
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