Sprint’s Mammoth $20 Billion Gamble with 4-year iPhone Deal

Sprint’s Mammoth $20 Billion Gamble with 4-year iPhone 5 Deal
Sometimes when you hear the term “all or nothing”, it’s just conventional in sound and effect, but Sprint really took it to the next level with the latest exclusive iPhone 5 carrier deal. The USA’s no.3 wireless carrier has held rival juggernauts AT&T and Verizon at bay till somewhere between January and March of next year, by committing to buy at least 30.5 million iPhones. Will it go the distance or not with stakes this high? Fingers can only be kept crossed.

The Broader Strokes

Let’s take a little limelight off of the deal and analyze something deeper here. I mean…whoa! Can you fathom the leverage that Apple now has over telecom carriers? We’re basically looking at history here, with a consumer products company being able to hook customers to the extent that a national telco giant has no option but to go with the flow….it does not matter whether Sprint Nextel is able to sell its inventory or not, it has to buy the 30.5 mill units from Apple. Basta.
And at current rates, the price tag is a whopping 20 billion crisp green bills. However, if the move pays off, then this is finally a breakthrough for a company that hasn’t posted a full-year profit since 2006, and that’s a painful half-decade right there.

Enter: Battle-Mode

One of the key points to ponder here is, what was the Sprint management thinking when they did this? When CEO Dan Hesse put the 4-year terms to the Board, sources familiar with the situation said that the focal debate was whether the payoff would be too long in coming. Plus, the deal’s effect on the company’s operating income is “staggering.” The conclusion was, that the “Sony” (as it is called in-house Sprint) project needs to be executed, because it’s either now, or never. Directors at Sprint Nextel basically, figured, “How can we pass this up?” So, with the iPhone 5 coming in with more memory, faster processor, and supporting 4G mobile broadband, this can potentially be the thaw in financial ice or the fire that will burn them to the ground.

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