Sprint CEO to take pay cut as iPhone subsidies pinch

“Sprint Nextel chief Daniel Hesse said he would take a cut in pay this year, after coming under fire from some shareholders disappointed with the hit the company’s results took from subsidizing Apple’s popular iPhones,” Siddharth Cavale reports for Reuters.

“Hesse said his 2012 salary would be cut to repay about $346,000 in incentive pay that he has already received and forfeit additional amounts that he was eligible to receive under his 2011 and 2012 incentive plans,” Cavale reports. “‘These voluntary actions regarding my personal compensation, which total $3,250,830, will eliminate any benefit for me to the discretionary adjustment the compensation committee made earlier this year,’ Hesse said in a letter to the company’s human resources department.”

Cavale reports, “Sprint’s massive $15 billion bet on selling Apple’s iPhones has not gone too well with investors, disappointed that the high subsidies on the device [40% higher, or $200 more per device, than what it pays for other phones] had pushed up costs at the No. 3 U.S. operator, even as it added more subscribers.”

Read more in the full article here.

MacDailyNews Take: Sprint shareholders must prefer bankruptcy. In the U.S. especially, a carrier either has Apple’s revolutionary iPhone or they’re a loser.

Related articles:
Apple is beating Android in the U.S., despite reports to the contrary – May 3, 2012
iPhone owners least likely to switch carriers over poor service; significantly more likely to stick with their phone – May 3, 2012
Apple CEO Tim Cook: Enough of this silly talk over iPhone subsidies – April 25, 2012


  1. MacDailyNews Take: Sprint shareholders must prefer bankruptcy. In the U.S. especially, a carrier either has Apple’s revolutionary iPhone or they’re T-Mobile.

    Fixed. 😉

  2. I like Hesse. He has some stones. I was with Sprint for years until they did something with their towers near where I lived at the time and became unusable. Five more months on my ATT contract. Maybe he’ll get me back.

    1. I own shares of Sprint (in addition to Apple & AT&T).

      I bought right after the share price tanked because of the massive subsidies that Sprint would have to upfront. What the Wall Street bears don’t get is that in a year when that massive up-front cost is paid off that Sprint will be rolling in the $$$.

  3. How egalitarian of MDN! Expecting other people to subsidize their iPhone use. If you cannot afford an iPhone without someone else having to pay for your little toy perhaps you don’t deserve one, you snob.

    1. The so-called “subsidy” is really just a scam to lock customers into a 2-year long contract. The money comes out of customers pockets through something called a “phone bill”.

      Since most carriers in the US that account for the majority of the market follow this model, it is pretty much everyone.

      By the way, the “little toy” you sneer at happens to be the most profitable business on Earth. If Apple sold nothing more than the iPhone and related products (iCloud iTunes) it would still be the most profitable business on earth.

      Too bad you could not be in such a toy business.

    2. Agreed. Subsidies are nothing more than a scam perpetrated by corporations to entice consumers to buy something (in this case an Phone) they couldn’t otherwise afford to buy outright. Theses are usually the same people who then complain because they are locked into a contract, don’t like the terms of their agreement; ad infinitum.

  4. I left Sprint for AT&T, because of the iPhone.

    Now I have three iPhones in my plan, and their contract maturity dates are all over the place.

    In order for me to switch now, I would have to either pay an early termination fee, or hold off on two upgrades (yeah, right).

    I’d say that AT&T has a huge advantage, being the first on the market to offer the iPhone.

    That is going to be hard to beat.

  5. Here is some math regarding the subsidy. To do an apples-to-apples comparison, I’ll use T-Mobile and their plans (pre-paid, vs. subsidized). A good starting point for comparison is their ‘Unlimited everything’ prepaid plan for $50 (first 100MB of data at 4G, rest is throttled). A comparable subsidized plan is around $70 (unlimited voice/text, plus 100MB of data — not quite the unlimited, but sort of close).

    Over the two years, the subsidized plan would generate $480 more for Sprint than prepaid.

    The common knowledge says that the average iPhone subsidy is $450 per device (and an Android subsidy is about $280). This tells us that an average carrier profits more from a contract customer than from a prepaid customer.

    Furthermore, the carrier makes extra $240 per year for every subscriber on contract, which makes them most desirable AFTER the contract expired. And so many consumers deliberately let their contract expire, thinking they are smart (“they can’t shackle me with the 2-year commitment, I can leave now whenever I can!”). Meanwhile, that customer is paying $20 per month towards a phone he has long paid off.

    The only advantage of Android is the lower initial acquisition cost of consumer (having to pay less upfront for that device than for the iPhone). Otherwise, they are just as attractive (compared to the cheap prepaid consumers).

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