Subsidized iPhones Costing Sprint Money

To be competitive with giants like AT&T and Verizon Wireless, Sprint also took the smartphone route last year. The number three U.S. wireless carrier is finding that bundling Apple’s iPhones with service is not as lucrative as it may sound. To attract new subscribers, Sprint is selling iPhones at subsidized prices, which is hurting the wireless carrier.

An Associated Press report says that Sprint had to spend a lot in the last quarter to put iPhones in the hands of its customers. As a result, on Wednesday, Sprint posted its largest loss in three years, according to AP reporter Peter Svensson.

Even though the number three wireless carrier is making progress in terms of service, it is still finding it difficult to compete with big rivals like AT&T and Verizon Wireless, both of which sell iPhones, wrote Svensson.

Although, in the October to December timeframe, Sprint activated nearly 1.8 million iPhones, they were sold for a subsidized price of $99 or $199. Sprint buys them from Apple for around $600, according to Svensson’s report, which is costing the company a fortune. As per this report, Sprint estimated that the phone launch widened its quarterly loss by $630 million, or $350 per activated iPhone.

During the same quarter, AT&T activated 7.6 million iPhones and Verizon Wireless 4.3 million. While Sprint said 40 percent of the iPhone users were new to the company, AT&T reported a figure around 25 percent. Though the subscriber count went higher due to iPhones, the loss of selling them to new subscribers was also high.

However, CEO Dan Hesse defended Sprint's commitment to the iPhone on Wednesday. According to the CEO, the October release of the iPhone 4S has helped the company gain subscribers, wrote Svensson. “When Sprint didn't have the phone, every new iPhone launch would make subscribers defect to AT&T, and more recently, to Verizon,” Hesse said. He added, “iPhone also spurs fewer calls to customer support, and uses less network capacity than smartphones running Google's Android software,” wrote Svensson.

According to the AP report, Sprint's total loss for the 4Q quarter was $1.3 billion, or 43 cents per share. By comparison, last year the loss was $301 million, or 10 cents per share.