Sprint filing reiterates huge price paid for the Apple iPhone, big profit still expected

To join AT&T and Verizon in the the business of selling the Apple iPhone, Sprint had to sign a pact with Apple that promised that the nation's third largest carrier would buy $15.5 billion of the device over four years. the company announced this last October and the figures were re;peated in the carrier's 2011 10-K filing with the FTC. The financial burden on Sprint is high considering it offers as much as a $450 subsidiary on an $850 64GB variant of the Apple iPhone 4S. Sprint has said that it is paying Apple $200 more than other carriers for each iPhone

During the holiday quarter, Sprint picked up 640,000 new iPhone customers and sold 1.8 million units of the device. This means that with each new customer paying $70 to $120 per month, Sprint will have picked up an additional $1 billion in revenues. That doesn't include current Sprint customers who updated to Apple's touchscreen phone. Sprint is drawing new customers for the iPhone because it is the only one of the major carriers offering unlimited data. This attracts heavy data users who have found themselves paying overages or having their data speed throttled to 2G speed during times of heavy tower congestion. So even at $80 per month, there are customers who would prefer to use the Apple iPhone on Sprint. And as more and more customers find themselves getting throttled ( in more ways than one) by the major carriers, more and more iPhone users might jump to Sprint.

But wait! A report last month quoted Sprint CEO Dan Hesse as saying that 1% of Sprint's users are throttled. Well, that still leaves unlimited data for the 2%-5% of Sprint customers that might be suffering through slower data speeds on other carriers.

Sprint's deal with Apple is expected to bleed $1.2 billion of red ink this year, by next year the deal should start to turn profitable and Sprint will be firmly in the black at the end of the four year deal in 2015. While the subsidies on the device are triple what Sprint had been paying, the retention of iPhone users, the ability to draw new customers and the profitable data plans will make committing to the Apple iPhone a very good decision for Sprint. Previously Sprint said that as the contract expires, it expects to make the equivalent of $7-8 billion in 2011 dollars. We leave you with the words of Sprint CEO Dan Hesse who says, "iPhone has an expensive contract, but is worth every penny."

source: electronista