SoftBank is in talks to take a majority stake in Sprint, the perpetual also-ran in the US wireless market.The reason why this is happening? Blame Apple.
SoftBank is in a strong position because it adopted the iPhone before rivals in its home market of Japan. (It specifically noted the iPhone as a factor in its 10 per cent growth in revenues last year.)
Sprint, meanwhile, lagged behind AT&T and Verizon in offering the iPhone, losing customers who defected to those carriers specifically to get the device.
Sprint had singularly bad judgment in picking hardware partners in recent years. First it made a big bet on Palm’s WebOS devices. Then it switched to pushing the BlackBerry just as consumer interest in RIM’s smartphones imploded.
To get Apple to make a version of the iPhone that ran on its network, Sprint had to make a $15.5 billion commitment to purchase iPhones—a staggering figure that until recently was higher than its entire market capitalisation.
iPhone customers typically pay more in monthly fees, but carriers have to spend heavily on subsidies to make up the difference between the price they pay Apple for iPhones and what they charge consumers.
Sprint is also alone among the big carriers in continuing to offer unlimited data plans—an attractive feature for smartphone users. But it needs to add spectrum to keep up with demand, which is why it’s reportedly been in talks to buy MetroPCS, a smaller wireless player.
So a lot of the money SoftBank pumps into Sprint will go directly to Apple to buy more iPhones—and for spectrum to keep them connected.