Sprint Nextel (NYSE:S) has essentially bet a large chunk of its future on Apple's (NASDAQ:AAPL) iPhone, and has ordered a total of 30.5 million iPhones over the next four years for a total commitment of $20 billion, according to a report in the Wall Street Journal.
The report, which cited unnamed sources familiar with the matter, said that Sprint CEO Dan Hesse told the company's board in August that Sprint will lose money on the deal until 2014. Reports in both the Journal and Bloomberg have said Sprint will get the next iPhone, which Apple is widely expected to unveil at its Cupertino, Calif., headquarters Tuesday. The report said Sprint will subsidize each iPhone, at a cost of $500 per device, and that the company expects to sell the bulk of its iPhones between 2013 and 2015.
Representatives from Sprint and Apple declined to comment, according to the Journal.
"This is a bet-the-company kind of thing,'' one source told the Journal, saying the projected hit to the company's operating income is "staggering."
Hesse hinted at the possibility that Sprint might get the iPhone at an investor conference last month. Without confirming anything, Hesse said Sprint's financial guidance might have to be updated if is fourth-quarter handset lineup changed. "Theoretically, if we were to secure such a device, we may have to adjust guidance accordingly for that," he said.
Sprint, which has a smaller postpaid subscriber base than AT&T Mobility (NYSE:T) and Verizon Wireless (NYSE:VZ), could face an uphill battle in selling that many iPhones. However, the carrier's trump card is that unlike its larger rivals it still offers unlimited smartphone data plans, which could help it win budget-conscious consumers who want the phone away from other carriers. AT&T and Verizon sold 12 million iPhones within the first six months of the year.
- see this WSJ article (sub. req.)
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