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Did Sprint Pay a Fortune For iPhone?
CEO States They Won't Make Money on Deal Until 2014
by Karl Bode 06:04PM Monday Oct 03 2011
Like Sprint's planned migration to LTE, it's not a particularly well-kept secret that the company will finally get the iPhone 5 this month -- or that the company plans to continue offering unlimited data plans for the device in the hopes of giving AT&T and Verizon a little more competition. Despite unlimited data and a number of ever-dwindling pro-consumer policies, Sprint hasn't quite seen the kind of subscriber growth they'd like -- and blames most of that on the lack of the iPhone. As a result, the Wall Street Journal reports that Sprint was willing to shell out an arm and a leg to make the iPhone deal happen:
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Sprint Chief Executive Dan Hesse told the board in August that Sprint would likely lose money on the deal until 2014, according to people familiar with the matter....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. 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.
Adding a very interesting wrinkle is a story over at the Boy Genius Report citing a source that says Sprint didn't pony up this cash just to get the iPhone alongside AT&T and Verizon -- they paid this much to get the iPhone 5 exclusively for a short while. According to the website's source, AT&T and Verizon will be offering the iPhone 4S, which will feature more modest advancements:
I have been told that Sprint will be getting the iPhone 5 — yes the real iPhone 5, not the iPhone 4S — as an exclusive. And it will be a 4G WiMAX device. AT&T and Verizon would launch the iPhone 4S and get the iPhone 5 some time in the first quarter of next year as an LTE device. Globally, the iPhone 5 might be available as a 4G HSPA+ device.
The rumor sounds plausible, given that Apple was expected to launch an LTE version of the iPhone early next year, giving AT&T and Verizon a little more time to get their LTE networks up to snuff. However, paying that much to get the iPhone 5 exclusively for what will probably amount to a relatively short window is a huge risk for a company that hasn't posted positive earnings in fifteen consecutive quarters. Sprint also this week is set to announce a costly migration to LTE wireless broadband service as the company fights to stay competitive in a market that will likely inevitably see the union of AT&T and T-Mobile.

If these rumors are true (we'll find out tomorrow), Apple made out like a bandit, and Sprint paid a ridiculous and potentially dangerous fortune for a short-lived, not-really exclusive arrangement that won't turn Sprint's fortunes around. Unless the iPhone 5 is a drastic and revolutionary improvement over the iPhone 4S, and the exclusive is longer than six to eight months, Sprint may have just made a legendary blunder that could cost Dan Hesse the company.

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