When third-place carrier Sprint first got the iPhone 4S, it quickly became clear that they had literally bet the company on the notion that Apple’s popular handset could save them from being steamrolled by AT&T and Verizon. In fact, Sprint agreed to pay Apple $20 billion over the next four years just to secure rights to the iPhone, whether they can sell them or no. The whole company is riding on the iPhone.
That could have turned out to be a big mistake suggests a new report today, which says that the nation’s third largest carrier is on the verge of going bankrupt. And what bankrupted them? The iPhone.
According to Bernstein analyst Craig Moffett, Sprint is facing “increased competition, growing debt and steep costs, with flops in Clearwire’s WiMAX technology, a failed LightSquared partnership and a risky $15.5 billion gamble on Apple’s iPhone,” all of which may drive Sprint to bankruptcy courts.
That’s pretty bad already, but if Apple releases an LTE iPhone later this year, which it is believed they will do, things could get a lot worse for Sprint. LTE is coming to Sprint in 2012, but Verizon and AT&T’s deployment of LTE is far, far further along than Sprint’s. You think people buying new AT&T LTE iPads were dumb? Imagine the iPhone 5 equivalent.
That said, there’s no indication right now that Sprint is planning on filing a 404. Rather, the analyst in question is simply talking about risk, and as he sees it, the risk of Sprint going bankrupt has gone up markedly in 2012. Who knows where Sprint will find itself by the end of the year, but one thing’s for sure, it’s got an uphill struggle with the billions it owes Apple.
John Brownlee is a writer for Fast Company, and a contributing writer here at CoM. He has also written for Wired, Playboy, Boing Boing, Popular Mechanics, VentureBeat, and Gizmodo. He lives in Boston with his wife and two parakeets. You can follow him here on Twitter.
16 responses to “The LTE iPhone Could Help Bankrupt Sprint”
Yes, and Apple will never ever let Sprint renegotiate their deal. Tim Cook will just exact his pound of flesh and shove Sprint into the abyss because Apple hates the reduced number of iPhone customers that Sprint will bring to the table.
FTA:
“Several other analysts have said that they do not see Sprint filing for bankruptcy in the next few years, however”
“‘To be clear, we are not predicting a Sprint bankruptcy,'”
“Moffett doesn’t expect Sprint to file for bankruptcy any time soon”
“‘The risk they could go bankrupt has gone up but that’s a very very low risk'”
What a lot of talk about nothing at all.
Great reporting, Brownlee!
/s
I would hate to see Sprint go, because it would leave AT&T and Verizon to finally extract every pound of flesh they can from consumers, raising our bills more and more each day. As much as people like to hate on Sprint, they hold a valuable chip on the table – keeping Verizon and AT&T in check. I hope they can claw their way out of this some how.
First, the current iPhone 4s is the 5th generation iPhone… lets move on and drop this BS iPhone 5 name.. much like apple did with the new iPad being..”iPad”. Sequentially the next phone is #6. Next, Sprint has made far worse decision leading them up to the current cash strapped situation. This article should have focused on how both T-Mobile and Sprint are struggling to survive amongst Verizon and At&t pounding them into submission. People are demanding more data rich experiences forcing even the large carriers to expand at accelerated pace and raise rates. When someones phone is pulling double or triple their home internet… to stream Facebook data..on their phone, we have a problem Houston.
maybe apple will buy them when they are bankrupt…
F U C K APPLE…
THEY DONT CARE IF YOU WILL GO BANKRUPT AS LONG THEY ARE MAKING MONEY FROM YOU…
Remember when they been saved by BILL GATES???
I am confused. How is it that Apple is to blame for a business decision made by Sprint? Apple charges what they charge. If Sprint couldn’t afford the iPhone, then they should not have entered into a deal with Apple.
That being said, there’s nothing in the article that says how much Sprint has increased subscribers since the iPhone, which is the true test of whether or not the deal was a good one.
Well you should have known, when started on this article…Its Mr.Brownlee what else can u expect…
Refresh my memory about the Bill Gates bit.
Also, it’s pretty difficult to make money off of a bankrupt company. They tend to make crappy customers.
GOOGLE it…
BILL GATES helped apple when they are almost bankrupt…
Even early 2000, apple dont have that much money, ONLY 2007 when they started to make serious money… Most billion dollar company made it to the top like exxon slowly but surely. On the other hand, apple made tons of money like a rocketship and will go down in the future like a torpedo…
Mark my words…
To make it short,
Dan hesse is an idiot…
Even they can sell more iphone now, still they will owe $20 billion to apple.
But the problem is more windows based, android and blackberry 10 coming next year then people will have more choices and have the possibility of cannibalizing the iphone sale even apple will make an iphone that can bring you to an island…
Its a sad fact to sprint…
lol
Sounds like a bad tempered customer service rep I spoke to when I had a problem with my Sprint service…. 10 years ago.
Get your facts straight house cat. It was 1997 when MS made a clear investment into Apple that allowed Steve to negotiate better terms with suppliers. After cleaning house, they started with their first big product: the iMac.
The iPhone, despite the perception, only holds a small share of the mobile market. The trick is to make money on every phone you sell to cover fixed cost. Most people don’t need (or willing to pay for) a smart phone.
It is still by no means certain that Apple will release an LTE iPhone this year. I think is reasonably likely, but getting an LTE chipset into the iPhone enclosure with decent power and heat profiles is going to be a good deal harder than it was with the iPad. And even if they do, you have a two year upgrade cycle. Only a small minority of people buy every new iPhone the moment it next comes out. The question is more “What is available when I am next due an upgrade?” rather than “What is available the moment Apple has a new phone?”. This gives Sprint a little bit of leeway.
i agree… ive had contracts with both verizon and at&t in the past and i felt both services sucked… i ended up with sprint granted customer service was HORRIBLE but it was still far better than the bleeding that i received from the other 2 vultures… Sprint has come a long way in the past few years and i hope Apple cuts them some slack under the table…
u think?