“Sprint’s 10-K report, for the fiscal year ending in December, [was] filed this morning,” Tiernan Ray reports for Barron’s. “In that report, Sprint said its sales of Apple’s (AAPL) iPhone will cause its profit in wireless to decline this year, because of a higher average subsidy on the iPhone than for other mobile handsets.”
During 2011, the Company entered into a purchase commitment with Apple, Inc. to purchase a minimum number of smartphones, which on average, is expected to carry a higher subsidy per unit than other smartphones we sell. In addition, during 2012, we expect to make further progress on Network Vision, including certain costs associated with the ongoing decommissioning efforts of the Nextel platform. As a result, we expect that wireless segment earnings will decline in 2012 as compared to 2011 until we benefit from Network Vision, through reduced network and operating costs, and begin to see further increases in retail service revenue through improved total retail postpaid net additions sufficient to recover these increased equipment net subsidy and acquisition costs. – Sprint’s 10-K report, February 27, 2012
Ray reports, “Sprint said it has an obligation to purchase at least $15.5 billion worth of iPhones from Apple under their agreement, and said it expects to purchase more than that.”
Read more in the full article here.
[Thanks to MacDailyNews Reader “Fred Mertz” for the heads up.]
Sweet lord.
It is incredible how, five years later, the iPhone continues to sustain higher initial subsidy. In other words, carriers have no problem paying more up-front for the iPhone and recovering that money over time, than they do for any Android (or other) smartphone. This higher subsidy makes the iPhone appear around the same price as devices that are actually $50 to $150 cheaper (at full, unsubsidised price). Not to mention that the higher subsidy comes on top of a totally unique limitation, where carriers aren’t allowed to place ANYTHING on that iPhone — no logos, no stickers, no loads of crapplets that are supposed to suck more money out of the subscriber, so there is no way for a carrier to squeeze some revenue on the side in order to make up for that colossal subsidy. In other words, Android users end up paying MORE for their cheaper device than iPhone folks, and that device will have all these crapplets that keep trying to squeeze them for even more cash…
It is difficult to overstate how incredibly powerful hand Apple has with the iPhone in their game against the carriers. Nobody before or since has had that power (not even RIM).
In other words, Android is helping to subsidize iOS devices on the telcos to make up for the extra cost the telcos pay for iPhones!
Awesome comment!
Powerful my @ss….
Look at how AT&T is able to bully up on Apple with its so called “top 5%” Data Throttling scheme for loyal unlimited data customers. You can bet that if Steve Jobs were alive, he’d be threatening to pull the device from AT&T over this.
No. Steve Jobs saw and understood the big picture.
I’m sorry, but the top 5% of data users are either too lazy to find a wifi signal, or spend way to much time streaming video. Outliers are always treated differently.
Who are you to determine if I am watching touch data or streaming to much … I purchased an ” unlimited plan because I wanted to stream heavy amounts and what AT&T and the rest are doing is basically bait and switch and this should be stopped at once either by our government or buy our power as consumers ….