Rising Apple iPhone subsidy costs force Sprint CEO Dan Hesse to take pay cut
0. phoneArena 04 May 2012, 22:32 posted on
Thanks to the higher costs involved in subsidizing Sprint customers purchase of the Apple iPhone, the carrier's CEO Dan Hesse said that he would be taking a pay cut in 2012; Hesse's pay will be reduced $346,000 to give back incentive pay he already received and he will forfeit $3.25 million dollars in incentive pay...
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83. Sniggly (Posts: 7220; Member since: 05 Dec 2009)
We're not arguing that Apple doesn't bring customers. But you would have to be insane to argue that the iPhone itself doesn't cut into profit margins for anyone but Apple.
Why do you think Verizon introduced an upgrade fee scant months after trying to introduce a bill pay fee?
89. taco50 (banned) (Posts: 5506; Member since: 08 Oct 2009)
It does in the short term but long term it increases profits. Listen to Randall Stephenson's interview about how AT&T profit margin increased with the iPhone.
93. remixfa (Posts: 14251; Member since: 19 Dec 2008)
it pushed their profit margin because it got people to move to smartphones. The iphone was a conduit to higher monthly bills. However, the iphone itself is a huge loss leader for any company that accepts it. ATT and VZW dont start making actual profit off of iphone customers until about month 20 into the contract. The hope is that they bring extra lines that dont want an iphone,dont upgrade right away, or that they go to something else other than another iphone.
Now think logically. If it takes ATT and VZW at their monthly prices around 20 months to make money off of iphone users, how long does it take sprint to make money? Do they ever?
95. taco50 (banned) (Posts: 5506; Member since: 08 Oct 2009)
Why did Sprint ink a deal with Apple if they thought it wouldn't make money? Sprints CEO has done multiple interviews where he says the iPhone deal is a good deal and is paying off.
80% of AT&T smartphone sales are iPhones. They seem to be doing fine. In fact if you actually listen to Randall Stephenson's interview he asked that exact question about iPhone subsidies and he explains how it's worth it because it increases profits.
98. remixfa (Posts: 14251; Member since: 19 Dec 2008)
"The hope is that they bring extra lines that dont want an iphone,dont upgrade right away, or that they go to something else other than another iphone."
i already answered your question. learn to read.
101. taco50 (banned) (Posts: 5506; Member since: 08 Oct 2009)
So Sprint signed a $15 billion deal with Apple hoping they wouldn't sell iPhones? Do you see how there's no logic to what you're saying? Read some interviews with Dan Hess to understand why the iPhone is good for Sprint.
103. remixfa (Posts: 14251; Member since: 19 Dec 2008)
no.. to buy something else for their upgrade instead of another iphone..
what a buffoon.
104. remixfa (Posts: 14251; Member since: 19 Dec 2008)
im going to try to explain this to you really slow
the iphone is a loss leader. AKA, they take the hit on the iphone hoping to make it up in the end.
Most people have family plans. That means you are normally adding more than 1 line at a time. If one of those people wants an iphone bad enough, they will go to the carrier with it. if they are price concious, Sprint is the best option. So now sprint adds 2 customers where they would not have been considered before, but only one of them gets an iphone. Sprint makes jack nothing on the iphone subscriber, but makes a profit off of the other line that was added at the same time. Sprint just made more profit than they would have otherwise, since they wouldnt have gotten those 2 lines without the iphone. The iphone is killing their bottom line while increasing their revenue stream.
Sprint is set to not make a profit for 3-4 years because of the iphone deal even though it will increase revenue.
115. ngo2dd (Posts: 852; Member since: 08 Jul 2011)
So how is T-mobile doing? Oh ya they are in last place out of the big 4. By a lot too. Att is doing pretty good with the iphone sell and profit. Sprint was losing customer like crazy. As much as you hate apple, they are great at marketing and many people do switch to other carriers just for the iphone. Just look at VW when is got the iphone 4 and how many people switch from ATT to VW. You talk about have taco is a troll, look at yourself.
70. TROLL (banned) (Posts: 4851; Member since: 13 Apr 2012)
I have an iphone4s64gb I love like apple products
But really hate dislike closed ecosystem....
Apple apps are good quality....
I'm a android fandroid.....
114. ngo2dd (Posts: 852; Member since: 08 Jul 2011)
For people who say Apple does not bring in customer. Sprint get 1.5 million customer in Q1 of 2012. Sprint did not release any high-end phone in Q1, and many of them are for other company. News flash for everyone Carrier do not make money off the phone. They make money off contract. The more people on contract the more many they can earn.
124. atheisticemetic (Posts: 377; Member since: 18 Dec 2011)
but when the subsidy of the phone cuts into the profit that they make on the actual contract? you have a problem
tower maintenance, customer support, sales reps.
all of these things factor into someone just walking into a store (or getting online) and purchasing a phone
remember...sh*t rolls down hill...think my friend
123. Sprintfan (Posts: 68; Member since: 18 Nov 2011)
Lets do some math:
Apple Iphone 4s:$650.00
Samsung Galaxy Nexus: $550.00
2 year pricing for both devices:$199.99
The minimum plan for these phones:$79.99
On the iphone it will take an average of about 5 bill cycles to become pay for the subsidy. And about 4 bill cycles to pay for the Nexus.
So during the 2 year duration of the contract Sprint wil make $1500.00 of the customer for an iphone and $1600.00 off a customer for the average of a nexus.
On a family plan it is different. On a 5 line data plan the monthly cost is average $48.00 per line. So essentialy it can take 9-10 months to pay for the device subsidy.
So if you take the average of the 2 its going to take sprint 7 bill cyles average for the device to become profitable.
My point being. yes sprint made a huge commitment. yes it cost them a lot up front. yes they added more customers than ATT/VZW because of the iphone. yes this turns into profit, it takes a month longer than a high end samsung. yes sprint is on its way to becoming the best carrrier with Network Vision and TD/LTE in 2013. Any questions? :)
125. atheisticemetic (Posts: 377; Member since: 18 Dec 2011)
if you actually worked for a cellphone store you would realize that your math is quite off....
secondly are you serious about sprint becoming the best carrier? are you mad?!
i honestly think you're trolling...and if you're not then shame on you for failed logic :)
126. androiddownsouth (Posts: 598; Member since: 02 May 2012)
Yes I have a question. What are you smoking and where can I buy some? Must be something awesome if you think Sprint will become the top carrier ever, much less as early as next year.....
139. remixfa (Posts: 14251; Member since: 19 Dec 2008)
Did you go to Taco's school of math? The phone isnt paid off over 4 months, its worked into the monthly plan costs and generally paid off over 20 months or so.. and that's at VZW/ATT pricing scales.
Sprint is eating the cost of the iphone, which is pretty much eating the entire contract's profit, in hopes that those new iphone subscribers bring over their entire family so they can make money off the other lines. Then if the iphone user does not try to upgrade right away, they start making money off of him.
Expect carriers to try to make u not want to upgrade by adding even more fees and such.
127. ScelesticSteve (Posts: 26; Member since: 29 Mar 2012)
I'm sure his salary is still in the millions, which I think is completely ridiculous. Dan Hesse, it's better to have a cut salary which is still in the top 1% of Americans, considering 99% of them make considerably less for you. Without the iPhone, Sprint employees weren't going to have a paycheck in the future.
135. Berzerk000 (Posts: 4144; Member since: 26 Jun 2011)
The iPhone deal was a big commitment for Sprint. It's rough right now, but if they can get through this year with little to no problems, it should be smooth from then on. People flock to the iPhone, no matter what the competition. If people on Verizon were complaining about their iPhone not having unlimited data, or their plan being too high, well now Sprint is their option with it's cheaper plans. The only downside for consumers, Sprint's 3G network is really bad right now, and the iPhone only gets 3G. So it's either WiFi, or deal with insanely slow speeds.