Remember how desperate carriers were to get the iPhone on their networks? The billions Sprint and Verizon pledged to Apple in the hopes that they could promise a big enough order that Apple would have no choice but to give them the iPhone?
Looks like the laugh is on them. In fact, this year alone, Verizon might be on the hook for over $14 billion dollars in iPhones they are not likely to sell.
Here’s the deal. In 2010, Verizon pledged to buy $23.5 billion worth of Apple handsets in 2013. The problem? Everyone who has an iPhone already has one, and demand has slowed in the high-range market. In fact, for Verizon to sell that many iPhones, they’d need to sell twice as many this year as last year.
That’s not happening. iPhone growth has slowed to a crawl in the United States, and while the so-called budget iPhone should successfully open up the midrange market to Apple later this year — finally, a free, modern iPhone on contract! — it’s not due to land until September at the earliest.
This is all grim news for Verizon, and Apple is unlikely to back off. They have similar deals in place with other carriers: if they let Verizon slide, they’ll have to do the same for others. But some companies are in a better position to meet their commitments than the big red V. Sprint, for example, is on track to meet the $15.5 billion iPhone commitment they already made.
- Source Bloomberg