Should Sprint sell the iPhone 5?

by Matt Klassen on August 26, 2011

In more Apple news, it looks like Sprint is no longer the only carrier left off the iPhone Christmas list. Citing anonymous sources, the Wall Street Journal reported earlier this week that Sprint Nextel will begin carrying Apple’s new iPhone 5 when it’s purportedly released in October. (Of course T-Mobile doesn’t carry the iPhone yet, but with its impending merger with AT&T almost a sure thing, one could say it offers the iPhone by extension.)

With that particular merger looking to make AT&T the largest mobile carrier in country and Verizon’s iron grip on the American mobile market, Sprint has felt like the odd carrier out of late, one that now sits in distant third behind those two behemoths and again, the only one of the three without an iPhone.

But will Apple’s iPhone 5 solve Sprint’s woes? Will it generate new customers, and with them new long term subscriptions? Will it allow Sprint to compete with the big boys? One day after the announcement has both analysts and Sprint customers praising the iPhone acquisition, but have they stopped to consider the downside of being in league with Apple?

Although initially lauded as a much needed addition to Sprint’s mobile line-up, it looks like the enthusiasm of analysts, at least, has been tempered somewhat over the past twenty-four hours, as people take a moment to think about what the iPhone will really mean for Sprint.

The truth is, while the iPhone will likely generate new customers, the iPhone is known to also generate migraine strength headaches for carriers, issues that I’m sure at one time or another have had every iPhone carrier secretly wishing that consumer interest in the iPhone would begin to wane.

If you want to know the downsides of the iPhone, look no further than poster child AT&T, a company that has long struggled to cope with the data traffic generated by network hungry device. For Sprint, having the iPhone could very well mean increased pressure on its 3G network, pressure that could see cracks arise in Sprint’s largely spotless network veneer. But that’s certainly not the only problem.

In addition to network strain, the iPhone will also mean increased subsidy costs for the Sprint, meaning lower profit margins with the iPhone. For the other two American iPhone carriers, these razor thin profit margins have led to some big decisions, none bigger than both deciding to scuttle their respective unlimited data plans. I can’t imagine that Sprint, who’s profits overall are much lower than both Verizon and AT&T, would be able to survive without following suit.

But perhaps the iPhone 5 can replace the unlimited data plan as Sprint’s largest draw for new customers? Don’t count on it. Sprint is clearly the third wheel in this iPhone party, a phone who’s mystique and appeal has lessened somewhat due now to its wide availability. The point being, the iPhone won’t draw the customer base Sprint thinks it will and when Sprint has to scrap its unlimited data plan—and it will—it’ll be a greater loss than any iPhone gains.

That said, despite the strain on Sprint’s tight profit margins, despite the impending end for the company’s unlimited data plan, and despite all the associated network headaches the iPhone brings, investors, analysts, and customers remain enthusiastic, evidenced by the spike in Sprint’s stock value following the initial story. However, whether these short term gains can be translated into long term success with the iPhone remains to be seen.

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Written by: Matt Klassen. www.digitcom.ca. Follow TheTelecomBlog.com by: RSS, Twitter, Facebook, or YouTube.

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