Sprint to bet the farm on a $20 billion Apple deal over the next 4 years, iPhone 5 exclusivity in tow?
Wall Street Journal is reporting the staggering rumor that Sprint has locked itself into a deal with Apple to buy 30.5 million iPhones from it over the course of four years, which, at north of $600 ASP for the iPhone 4 in the last quarter, amounts to about $20 billion.
CEO Dan Hesse thinks that Sprint has a strong franchise and great customer service now, and only the lack of an iPhone version in its lineup is the reason behind customers defecting to other carriers. In order to assimilate so many iPhones, Sprint will have to double its contract subscribers, or convert the current ones to Apple fandom. In reality it will probably have to be a combination of both. An analyst predicted recently that Sprint might sell as many as six million iPhones next year, but that was before the rumored $20 billion deal with Apple
It is hard to imagine such a plunge by CEO Dan Hesse, which will make Sprint subsidize each iPhone with about $500 and then aim to recover costs over the two years of the contract without some sort of exclusivity over the iPhone 5. The sources say that the CEO himself said Sprint will be in the red on the deal until 2014. Sprint explicitly told its employees to be hush-hush about the iPhone arrival on its network, while working on things like upgrade fees and shorter contracts. If the unlimited data stays, however, it will be a great sticking point for new or current customers as well.
An early exclusivity boost on the iPhone 5 could just give Sprint that initial headstart it will need to make whole on the $20 billion bet. And indeed, another source points out something that seemed unbelieavable at first, but now makes much more sense - that Sprint will have a WiMAX-enabled iPhone 5 in its portfolio announced tomorrow, and will keep the exclusive rights to sell it until LTE versions appear on AT&T and Verizon next year. Let's not forget Sprint is also planning to go the LTE-way.
The international version is still expected to sport an HSPA+ 4G radio, while the other US carriers will have to make do with an upgraded iPhone 4 in the meantime, and its combined GSM/CDMA chip. The iPhone 4S is said to sport a slightly underclocked A5 silicon, 8MP camera on the back and "HD" front-facing camera, plus NFC chip and metal or quality plastic back.
The Sprint-only iPhone 5 that might be unveiled tomorrow, is expected to feature a boosted A5 chip, larger 4" display of the bright LG NOVA sort, but with higher resolution, 32GB of memory and a larger battery, plus the exclusive for the phone voice recognition integration dubbed Assistant.
Surprised about these eventual developments, or do you think this actually makes sense and ties the rumors nicely together?
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