Sprint CEO: iPhone's efficiency will sustain unlimited data plans

Sprint Nextel (NYSE:S) CEO Dan Hesse debunked the notion that the iPhone tends to cause network bottlenecks by saying the Apple (NASDAQ:AAPL) iPhone is so data efficient that it will help Sprint continue to offer unlimited data plans on smartphones.

"One of the beauties of carrying the iPhone is it extends the period of time and increases the likelihood of us maintaining unlimited data longer because it uses our network so efficiently," Hesse told Forbes following the company's third-quarter conference call.

That proclamation is a far cry from the early days when the iPhone was the source of AT&T's Mobility's congestion woes. The iPhone was once the biggest signaling hog among smartphones.

According to Hesse, the fact that the device looks for Wi-Fi connections and notifying users when Wi-Fi is available, traffic can be offloaded onto Wi-Fi, thus reducing network congestion. Hesse also said that Apple has tight control over apps and requires that they meet network efficiency requirements, such as cutting down on how many times an application pings the network.

"Our main [marketing] message is around unlimited," noted Hesse. "It is what makes us distinct."

But Sprint's bet on the Apple iPhone is not without risks. The company admitted that it could need $7 billion in new financing over the next few years to cover the cash shortfall caused by its investment in the iPhone and its Network Vision upgrade. Specifically, the company said it would need to refinance $4 billion of debt and raise up to $3 billion from vendor financing deals in the next few years to cover the iPhone and the network costs and keep its cash balance at a minimum of $2 billion. Investors are skeptical about the deal and said it would be at least a year before they can asses whether both plans are working.

As for the reason why Sprint is ending its mobile broadband plans with unlimited access to the WiMAX network for tablet, netbook, notebook, USB card, connection card and mobile-hotspot users, Hesse said the company was forced to change because of network congestion. Smartphone network congestion hasn't reached that point yet. It's an interesting proclamation given the fact that Sprint and its wholesale WiMAX partner Clearwire (NASDAQ:CLWR) have touted the capacity advantage of the Clearwire network thanks to Clearwire's spectrum rich holdings.

"Data cards are much heavier users of our network than smartphones," Hesse told Forbes. "It's still quite profitable for us to keep unlimited [data] on smartphones."

For the third quarter, Sprint announced that it added nearly 1.3 million net wireless customers, including net additions of 441,000 retail subscribers and net additions of 835,000 wholesale and affiliate subscribers as a result of growth in MVNOs reselling prepaid services. However, Sprint lost around 44,000 net postpaid subscribers during the quarter, narrower than the carrier's loss of 107,000 in the third quarter of 2010. Sprint added 485,000 net prepaid subscribers during the quarter, which includes net additions of 839,000 prepaid CDMA customers, offset by losses of 354,000 net prepaid iDEN customers. Sprint ended the quarter with 53 million customers.

For more:
- see this Forbes article
- see this FierceWireless article
- See this Reuters article

Related articles:
Sprint de-emphasizes WiMAX by eliminating unlimited offerings
Sprint looking rosey in Verizon's move to usage-based smartphone data pricing
Sprint to tweak tablet data plans, will add unlimited WiMAX
Sprint to launch LTE on 1900 MHz spectrum by mid-2012
Sprint confirms unlimited data plans for iPhone 4S and iPhone 4
New Sprint ad campaign hinges on unlimited data
Sprint to wholesale Clearwire's WiMAX service to others
Sprint to pay Clearwire $1B over two years in revised wholesale partnership

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