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

Posted:
in iPhone edited January 2014
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.
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Comments

  • Reply 1 of 33
    drdoppiodrdoppio Posts: 1,132member

    Quote:

    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...

  • Reply 2 of 33
    docjreydocjrey Posts: 11member


    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. 

  • Reply 3 of 33
    jd_in_sbjd_in_sb Posts: 1,483member
    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.
  • Reply 4 of 33
    drdoppiodrdoppio Posts: 1,132member

    Quote:

    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/

  • Reply 5 of 33
    drdoppiodrdoppio Posts: 1,132member

    Quote:

    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.

  • Reply 6 of 33

    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?

  • Reply 7 of 33
    drdoppiodrdoppio Posts: 1,132member

    Quote:

    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.

  • Reply 8 of 33


    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.

  • Reply 9 of 33
    tallest skiltallest skil Posts: 43,399member

    Quote:

    Originally Posted by FriedLobster View Post

    LESSON: DON'T F__CK with Apple.


     


    Real lesson: Don't trust DigiTimes. image

  • Reply 10 of 33


    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. 

  • Reply 11 of 33
    lucaluca Posts: 3,833member
    docjrey wrote: »
    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.
  • Reply 12 of 33
    anantksundaramanantksundaram Posts: 18,894member

    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?

  • Reply 13 of 33

    Quote:

    Originally Posted by Tallest Skil View Post


     


    Real lesson: Don't trust DigiTimes. image



     


    THIS. image

  • Reply 14 of 33
    drdoppiodrdoppio Posts: 1,132member

    Quote:

    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.

  • Reply 15 of 33


    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

  • Reply 16 of 33
    anantksundaramanantksundaram Posts: 18,894member

    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.....

  • Reply 17 of 33
    jragostajragosta Posts: 10,473member
    drdoppio wrote: »
    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?)
  • Reply 18 of 33
    anantksundaramanantksundaram Posts: 18,894member

    Quote:

    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....

  • Reply 19 of 33
    drdoppiodrdoppio Posts: 1,132member

    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.

  • Reply 20 of 33


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

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