Sprint only recently got to carry the
iPhone on their network, after a long awaited wait. But, it looks like
they have already taken a giant step forwards, now that they have got
their foot in the door, in terms of capturing the audience that loves
the iPhone. A financial deal that occurred sometime in October 2011
seems to suggest that Sprint has entered into a contract where they have
agreed to buy $20 Billion in iPhone’s from Apple, over the next 4
years! Read on to learn the staggering implications of this deal and why
we think that Sprint might have also secured a contract to carry the
iPhone 5 exclusively.
What does a $20 Billion contract with Apple mean for Sprint?
If Sprint have agreed to buy $20 Billion worth of iPhones over the next 4 years, financial analysts estimate that Sprint will have to sell 30 Million iPhone handsets over the next 48 months, just to break even. Over the last 4 quarters, an average of about 18 Million iPhone units have been sold across the world, each quarter. Apple have always said that the U.S. account for a majority of the iPhone sales. Let us go with a conservative estimate and say that 60% of Apple’s iPhone sales are generated in the U.S. So, this would mean that Apple sells about 11 Million iPhone’s every quarter, in the U.S. alone.
So, over the next 4 years, let us assume that Apple is able to maintain the same amount of sales. This would mean that Apple will sell another 176 million phones, out of which Sprint will have to sell at least 30 Million, just to break even, over the next 4 years. These numbers will actually be a lot higher as more and more people are moving away from ordinary phones to smartphones. But, why on earth would a company like Sprint take such a huge risk just to break even. So, that leads us to assume that Sprint expects to sells more than just 30 Million iPhones, to churn out a pretty good profit. Let us assume that they want to sell at least 50 Million iPhones over the next 4 years. 50 Million out of the 176 Million that will be sold will mean that Sprint will have to gobble up about 30% of the market share, in the U.S.
Where do Sprint stand currently, in terms of market share? Well, we don’t have current figures but, as of 2010, Sprint had a 16% market share in the U.S while Verizon had 33% market share. AT&T is just behind Verizon, having 31% of the market share. In other words, Sprint have to essentially double their market share if they want this $20 Billion iPhone deal to make them money. So, what does this essentially mean?
We think that the numbers suggest that Sprint has something really special up their sleeve, when it comes to iPhone sales. And, we think that they might get an exclusive on the iPhone 5. While many may think that this is a preposterous suggestion, we would like to point out that Sprint has already broken the tradition of matching offers from competitors. Sprint has started to offer unlimited data packages for its iPhone customers, much to the dismay of Verizon and AT&T that still continue to send out hefty data usage bills to power iPhone users on their network. If Sprint is aggressive enough to offer unlimited data packages and challenge the cell phone industry, we definitely think that they have the guts to approach Apple for an exclusive deal. In fact, we think that they might have already done so and then penned the $20 Billion contract with Apple.
What kind of an exclusive deal might Apple and Sprint be able to work out?
Now, the term exclusive can be interpreted in many different ways. Exclusive does not necessarily mean that the iPhone 5 will only be sold to Sprint customers and denied to Verizon, AT&T and other customers from other carriers. However, Sprint might have something exclusive in the sense that they might continue to offer the iPhone 5 with a unlimited data plan, while all the other carriers charge on a pay per usage plan. Obviously, a customer wanting the iPhone 5 will be really tempted to drop their carrier and go with Sprint as the promise of unlimited data is just too enticing. This is what Sprint is counting on.
Another form of an exclusive deal could possibly be worked out in the following manner. Apple and Sprint could possibly agree on an arrangement where iPhone 5 4G LTE phones are sold only through Sprint while Verizon, AT&T and other carriers get to carry a HSPA+ enabled iPhone 5 that will not support 4G LTE. As you might already know, 4G LTE speeds can bring in download speeds in excess of 30 Mbps while HSPA+ speeds can only bring in a very modest 14.4Mbps (in ideal conditions). In this way, Sprint could have a large advantage over other carriers when it comes to selling the iPhone 5, when it is eventually rolled out next year.
Will Sprint be able to pull off an exclusive iPhone deal?
This is a pretty big question mark. Sprint’s unlimited data offering has allowed them to sell more iPhone 4S units that Verizon or AT&T in the past couple of months. But, the company has already been hit hard with the huge spike in data downloading by millions of iPhone Sprint customers who are taking advantage of the unlimited downloading on the Sprint network. Since Sprint rolled out their unlimited data plans for the iPhones, their network is averaging about 480 Kb/sec in download speeds. Compare this to the average speed of 700 Kb/sec from Verizon and the 2.4Mbps speed from AT&T and you can already tell that Sprint is in trouble, already. If they are going to sell 30 Million more iPhones with a unlimited data plan, they are going to have to invest in huge upgrades to support the added bandwidth on their coverage.
Either that or they can discontinue the unlimited data plan. But, if they discontinue the unlimited data plan, they will lose the advantage they have over Verizon and AT&T that have a much bigger brand presence. So, Sprint has taken a pretty big plunge with the decision to spend $20 Billion on future iPhone purchases.
To make things worse, the Sprint stock is already struggling. Their stock plummeted when the contract to spend $20 Billion on iPhones was announced. But, since then, it has come back a little bit although it is still in a very fragile situation. If Sprint has to redeem itself from this situation, it would have to mean that they are going to use the iPhone 5 as a pretty significant weapon in their arsenal.
The only way they are going to do it is by offering exclusives on the iPhone 5 that no other carrier will be able to offer. This might bring about a situation where you might have to move away from your current network carrier, to Sprint, if you want the best iPhone 5 in your hands, sometime next year.
Catch the latest on iPhone 5 news, rumors and spec updates at the link just given.
What does a $20 Billion contract with Apple mean for Sprint?
If Sprint have agreed to buy $20 Billion worth of iPhones over the next 4 years, financial analysts estimate that Sprint will have to sell 30 Million iPhone handsets over the next 48 months, just to break even. Over the last 4 quarters, an average of about 18 Million iPhone units have been sold across the world, each quarter. Apple have always said that the U.S. account for a majority of the iPhone sales. Let us go with a conservative estimate and say that 60% of Apple’s iPhone sales are generated in the U.S. So, this would mean that Apple sells about 11 Million iPhone’s every quarter, in the U.S. alone.
So, over the next 4 years, let us assume that Apple is able to maintain the same amount of sales. This would mean that Apple will sell another 176 million phones, out of which Sprint will have to sell at least 30 Million, just to break even, over the next 4 years. These numbers will actually be a lot higher as more and more people are moving away from ordinary phones to smartphones. But, why on earth would a company like Sprint take such a huge risk just to break even. So, that leads us to assume that Sprint expects to sells more than just 30 Million iPhones, to churn out a pretty good profit. Let us assume that they want to sell at least 50 Million iPhones over the next 4 years. 50 Million out of the 176 Million that will be sold will mean that Sprint will have to gobble up about 30% of the market share, in the U.S.
Where do Sprint stand currently, in terms of market share? Well, we don’t have current figures but, as of 2010, Sprint had a 16% market share in the U.S while Verizon had 33% market share. AT&T is just behind Verizon, having 31% of the market share. In other words, Sprint have to essentially double their market share if they want this $20 Billion iPhone deal to make them money. So, what does this essentially mean?
We think that the numbers suggest that Sprint has something really special up their sleeve, when it comes to iPhone sales. And, we think that they might get an exclusive on the iPhone 5. While many may think that this is a preposterous suggestion, we would like to point out that Sprint has already broken the tradition of matching offers from competitors. Sprint has started to offer unlimited data packages for its iPhone customers, much to the dismay of Verizon and AT&T that still continue to send out hefty data usage bills to power iPhone users on their network. If Sprint is aggressive enough to offer unlimited data packages and challenge the cell phone industry, we definitely think that they have the guts to approach Apple for an exclusive deal. In fact, we think that they might have already done so and then penned the $20 Billion contract with Apple.
The $20 Billion deal between Sprint and Apple suggest that the iPhone 5 might be a Sprint Exclusive
Now, the term exclusive can be interpreted in many different ways. Exclusive does not necessarily mean that the iPhone 5 will only be sold to Sprint customers and denied to Verizon, AT&T and other customers from other carriers. However, Sprint might have something exclusive in the sense that they might continue to offer the iPhone 5 with a unlimited data plan, while all the other carriers charge on a pay per usage plan. Obviously, a customer wanting the iPhone 5 will be really tempted to drop their carrier and go with Sprint as the promise of unlimited data is just too enticing. This is what Sprint is counting on.
Another form of an exclusive deal could possibly be worked out in the following manner. Apple and Sprint could possibly agree on an arrangement where iPhone 5 4G LTE phones are sold only through Sprint while Verizon, AT&T and other carriers get to carry a HSPA+ enabled iPhone 5 that will not support 4G LTE. As you might already know, 4G LTE speeds can bring in download speeds in excess of 30 Mbps while HSPA+ speeds can only bring in a very modest 14.4Mbps (in ideal conditions). In this way, Sprint could have a large advantage over other carriers when it comes to selling the iPhone 5, when it is eventually rolled out next year.
Will Sprint be able to pull off an exclusive iPhone deal?
This is a pretty big question mark. Sprint’s unlimited data offering has allowed them to sell more iPhone 4S units that Verizon or AT&T in the past couple of months. But, the company has already been hit hard with the huge spike in data downloading by millions of iPhone Sprint customers who are taking advantage of the unlimited downloading on the Sprint network. Since Sprint rolled out their unlimited data plans for the iPhones, their network is averaging about 480 Kb/sec in download speeds. Compare this to the average speed of 700 Kb/sec from Verizon and the 2.4Mbps speed from AT&T and you can already tell that Sprint is in trouble, already. If they are going to sell 30 Million more iPhones with a unlimited data plan, they are going to have to invest in huge upgrades to support the added bandwidth on their coverage.
Either that or they can discontinue the unlimited data plan. But, if they discontinue the unlimited data plan, they will lose the advantage they have over Verizon and AT&T that have a much bigger brand presence. So, Sprint has taken a pretty big plunge with the decision to spend $20 Billion on future iPhone purchases.
To make things worse, the Sprint stock is already struggling. Their stock plummeted when the contract to spend $20 Billion on iPhones was announced. But, since then, it has come back a little bit although it is still in a very fragile situation. If Sprint has to redeem itself from this situation, it would have to mean that they are going to use the iPhone 5 as a pretty significant weapon in their arsenal.
The only way they are going to do it is by offering exclusives on the iPhone 5 that no other carrier will be able to offer. This might bring about a situation where you might have to move away from your current network carrier, to Sprint, if you want the best iPhone 5 in your hands, sometime next year.
Catch the latest on iPhone 5 news, rumors and spec updates at the link just given.
No comments:
Post a Comment