Sprint Spends $20 Billion

Sprint is banking on customers who want an iPhone on the Sprint network. Banking so much that they committed to give Apple $20 Billion, regardless of whether you’re gonna buy one. What does $20 Billion buy, 30,500,000 iPhones. That puts the cost to Sprint at $655.74 per phone. Granted this $20B is spread over 4 years.
Lets do some quick math here (I know, you weren’t expecting homework…)
Let’s assume Sprint is going to put these out for $199.99 with a 2 year contract. Let’s also assume that the average Sprint iPhone user will spend approximately $90 per month (pre-tax) to use the phone.
1 iPhone = $199.99
24 Mos Service @ $90/mo = $2,160
TOTAL Customer Revenue = $2,359.99
Less Cost of Phone = $655.74
Gross Profit = $1,704.25
Now we don’t know Sprint’s operating expenses are, but I would assume that they will get to add quite a bit of the $1,700+ to their bottom line, especially considering the revenue from some of the ancillary services they sell. Now let’s just do one more math problem (last one, I promise). In order for Sprint to pay back Apple, in full, (assuming they keep 50% of the $1700), they would only need to sell 11,735,368 iPhones. This leaves them with roughly 20 million 3G capable paper weights. The reason why this number is important is because I find it very difficult for Sprint to at 30 million iPhone users in the next four years, especially considering that Apple will have 3 updated versions coming in that time period, and the customer who got the iPhone 5, will want the 6, 7, and/or 8.
Don’t get me wrong, the Sprint has a great shot at selling all 30 million units, for the simple fact that they still have an unlimited data option. AT&T & Verizon have made it clear that they will not be going that route. I dare say, however, that if they start bleeding iPhone customers to Sprint, that Ma Bell and Big Red will change their tune.
The fun begins tomorrow, when Apple makes it’s announcement and debuts the iPhone 5. (Everyone already knows it’s coming, just tell us why it’s better, no need for senseless announcements).
Get the scoop on the iPhone Announcement here “Let’s Talk iPhone“, which Apple will not be streaming live, as they usually would for a new device release.

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