Report: Sprint Could Be on the Hook for $20 Billion iPhone Order

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The Wall Street Journal is reporting that Sprint, the nation’s third largest wireless carrier, has agreed “to purchase at least 30.5 million iPhones over the next four years—a commitment of $20 billion at current rates—whether or not it could find people to buy them.” That’s according to oft-quoted “people familiar with the matter,” though both Sprint and Apple declined to comment.

If true, it represents an enormous gamble for Sprint, but one the company apparently feels it has to make in order to compete with AT&T and Verizon. Sprint CEO Dan Hesse reportedly said recently that the biggest reason people leave Sprint is because it doesn’t sell the iPhone.

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With the addition of the iPhone to its lineup, Sprint would have a key advantage over Verizon and AT&T: unlimited data plans. Verizon offers between two and 10 gigabytes of data for between $30 and $80 per month, respectively, plus $10 per additional gigabyte in overage charges; AT&T offers 250 megabytes or two gigabytes of data for $15 or $25 per month, respectively, plus $15 per additional 250 megabytes on the 250-megabyte plan or $10 per additional gigabyte on the two-gigabyte plan.

Sprint, on the other hand, offers unlimited data and text messaging plans starting at $70 per month for 450 voice minutes. The company also has a $100-per-month plan that adds unlimited voice minutes.

The supposed addition of the iPhone to Sprint’s lineup may not bear fruit until as late as 2014, reports by the Wall Street Journal. In order to cover the deal’s costs, “Sprint would have to double its rolls of contract customers, convert all of them to the Apple device or a combination of the two.”

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While Sprint’s reported agreement to buy 30.5 million iPhones would amount to “$20 billion at current rates” as reported by the Journal, the publication also points out that “the volumes involved could signal Apple’s interest in broadening the base of customers by rolling out a cheaper device, which could lower Sprint’s total cost.” In other words, some chunk of those 30.5 million iPhones could be discounted iPhone 4 models, for instance.

Whatever the case, if the Wall Street Journal‘s information is accurate, this represents a big risk for Sprint. The deal’s possible upside, though, arguably makes it a risk worth taking. It could be, too, that Sprint feels it doesn’t have much choice. With both Verizon and AT&T both solidly entrenched in first and second place, respectively, and fourth-place T-Mobile trying to hitch itself to AT&T’s wagon, third-place Sprint needs a come-from-behind victory.

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[via WSJ.com]

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