Sprint is committing billions of dollars to Apple for licensing rights to the iPhone 4S, as the carrier makes a move that may be pivotal to its survival.
The Overland Park, Kan.-based carrier plans to buy more than 30 million iPhones from Apple for a total of $20 billion, spread out over the next four years. CEO Dan Hesse presented the plan to the board in August, according to the Wall Street Journal, and the company signed off on it soon after.
Sprint’s decision to commit to the iPhone, whether it can draw enough customers to buy the device, is a large-scale bet on its future. The carrier is expected to suffer losses from the deal until 2014, but the move may bring in new customers and help maintain old ones.
Despite paying billions to bring the iPhone to its network, Sprint will likely yield early rewards from offering the device. The carrier currently sits in a distant third place in the U.S. wireless market, but the iPhone 4S is expected to boost Sprint’s subscriber numbers over AT&T and Verizon’s because it has never offered the device before.
In addition, Sprint’s deal with Apple is a move to defend itself against AT&T’s merger with T-Mobile. Hesse said his number one fear is that a merger will leave Sprint unable to offer the necessary amount of devices to compete. But offering the iPhone assures Sprint will have the top selling device in the U.S. for the foreseeable future.
Hesse and Sprint’s decision to place so much emphasis on the iPhone may be a “bet the company” type of move, but of all the moves available, it may be the one with the best odds.
For years, Sprint lost subscribers due to the lack of the iPhone. Hesse said Sprint’s inability to carry the device was the number-one reason customers left for another competitor. Apple’s iPhone 4 and 3GS, the top-selling phones in the U.S. last quarter, were only available on AT&T and Verizon.
The iPhone 4S comes with a faster processor, 8-megapixel camera, Siri voice commands and HSDPA Internet access. The device will go on sale on October 14 for $200 for 16-gigabytes, $300 for 32-gigabytes and $400 for 64-gigabytes.