Sprint Nextel's (NYSE:S) Virgin Mobile brand will reportedly follow Cricket provider Leap Wireless (NASDAQ:LEAP) to become the second U.S. prepaid carrier to offer Apple's (NASDAQ:AAPL) iPhone, according to a report in the Wall Street Journal.
The report, which cited unnamed sources familiar with the matter, said that Virgin could begin selling the iPhone as soon as July 1. Pricing could not be determined, according to the report. The report said it was also unclear whether Sprint's Boost Mobile prepaid brand will also offer the iPhone.
A Sprint spokeswoman declined to comment and Apple declined to comment, according to the Journal.
Adding the iPhone to Virgin would help Sprint increase the pool of potential customers it can offer the device to. Sprint began selling the iPhone last October to its postpaid customers after agreeing to a four-year, $15.5 billion contract with Apple to sell the gadget.
Prepaid operator Leap will begin selling the iPhone 4S and iPhone 4 June 22. Leap's iPhone 4S will be available for $499.99 for the 16 GB model and the iPhone 4 will be available for $399.99 for the 8 GB model. The 16 GB iPhone 4S is often sold for $650 without a contract and the 8 GB iPhone 4 is often sold for $550 without a contract. Leap will offer the iPhone with its $55 per-month, all-inclusive unlimited talk, text and data plan, though after customers hit 2.3 GB of data in a month they may have their data speeds throttled.
Leap is paying Apple $900 million over three years for the iPhone. Importantly, Leap will only sell the iPhone in markets where it uses PCS spectrum, since the device does not support its AWS spectrum. Those markets cover 70 percent of its total covered POPs, which amounts to around 60 million POPs across the country. Those markets exclude major cities including Boston, Chicago and New York, but customers can roam onto other networks. Leap in 2010 inked an MVNO deal with Sprint that allows Leap to sell its services nationwide.
Virgin Mobile currently offers Android smartphones, including one running on Clearwire's (NASDAQ:CLWR) mobile WiMAX network, with plans that start as low as $35 per month. However, Virgin throttles customers' data speeds after they consume more than 2.5 GB of CDMA EV-DO data in a month. (Virgin's WiMAX service isn't currently throttled or capped.)
Credit Suisse analyst Jonathan Chaplin wrote in a research note that "a prepaid iPhone would be a modest positive for Sprint, as long as they don't subsidize it too heavily." He wrote that Sprint prepaid iPhone subscribers should churn at a lower rate than other prepaid customers.
- see this WSJ article (sub. req.)
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