Sprint Beats Q3 2011 Estimates, Looks Ahead to iPhone Impact [Updated]

[MacRumors]

Sprint today announced financial results for the third quarter of 2011, and while the carrier did not begin offering the iPhone until after the quarter ended, it was still able to beat analyst estimates and report a smaller-than-expected loss. Perhaps most significantly, Sprint reported a net gain of 1.3 million subscribers during the third quarter, the carrier's best performance in over five years.

Sprint also took the opportunity to tout the iPhone in its press release, citing the device's record-breaking launch and the expectation that iPhone customers will be among the carrier's most profitable.

Growth in Sprint brand net additions was achieved without the benefit of Apple's iPhone 4S and iPhone 4, which launched Oct. 14. The launch of this iconic device resulted in Sprint's best ever day of sales in retail, web and telesales for a device family in Sprint history. The response to this device by current and new customers has surpassed initial expectations. The iPhone is expected to be accretive for Sprint, and iPhone users are expected to be among Sprint's most profitable customers.

Overall, Sprint reported a loss of $301 million for the third quarter, down from a $911 million loss in the year-ago quarter. The carrier is said to have committed to purchase over 30 million iPhones over the next four years, with the upfront costs potentially resulting in Sprint taking an initial hit to its financial numbers. But with Sprint expecting strong profits from iPhone service contracts, the carrier anticipates that the iPhone will be a strong contributor to improved financial performance over time as it recoups its initial outlay.

Update: Sprint CEO Dan Hesse reported to Reuters that Sprint will need $7 billion in new financing over the next few years in order to support the iPhone commitment and the network transition to LTE.

Sprint said that while the iPhone would cost the company $15 billion in the next four years, it would generate $7 billion to $8 billion in projected future value for Sprint over that period.

Sprint said it will pay Apple an iPhone subsidy that is 40 percent higher, or $200 more per device, than the subsidies it pays for other phones.

But the company's executives said it should be worth the extra cost as the device is bringing in new customers.

"IPhone has an expensive contract but is worth every penny," Hesse said.

Article Link: Sprint Beats Q3 2011 Estimates, Looks Ahead to iPhone Impact [Updated]

 

[kjs862]

I'm sure their sales with be a to of higher. I know many people that got the Sprint iPhone.

 

[justinfreid]

Dollars in, dollars out

Apple's iPhone business model makes it so it's nearly minting money in Cupertino. Seeing the short term financial impact on Sprint of selling the iPhone, comprised of around $550 payments right to Apple for every contract a customer signs, indicates the strong pent up demand for the iPhone on different carriers and that the carriers are still willing to pay that upfront premium to sign up new data users. Apple gets cash stuffed into both pockets.
Kudos to Peter Oppenheimer, Apple's CFO.

 

[Tiger8]

Glad to hear

And I hope next quarter will be even better. I moved back to Sprint with 4s and very happy with them so far.

And their LTE ADVANCE network will hopefully be outstanding!

 

[Shrink]

I'm sure their sales with be a to of higher. I know many people that got the Sprint iPhone.

Now there's a solid scientific method for making sales projections.

 

[Jerome Morrow]

[/B]

Now there's a solid scientific method for making sales projections.

Just as good as analyst made one.

 

[mkrishnan]

Good for Sprint -- I'm not thinking about using them, but even without, a strong Sprint prevents a duopoly crisis with AT&T and Verizon. I'd like to see T-Mobile get a little stronger, too, or else someone else enter the national post-paid market.

 

[FaustsHausUK]

With the launch of the 4S, I jumped from AT&T to Sprint and so far, I couldn't be happier.

I don't care that AT&T offer faster theoretical speeds in Chicago. In reality, I get almost no signal for huge chunks of my daily commute so the consistency of Sprint wins out.

Hopefully now they have the iPhone, Sprint will see the success they deserve.

 

[jav6454]

With the launch of the 4S, I jumped from AT&T to Sprint and so far, I couldn't be happier.

I don't care that AT&T offer faster theoretical speeds in Chicago. In reality, I get almost no signal for huge chunks of my daily commute so the consistency of Sprint wins out.

Hopefully now they have the iPhone, Sprint will see the success they deserve.

Enjoy your 0.15 Mb/s Up/downs

 

[fruitpunch.ben]

Sprint said that while the iPhone would cost the company $15 billion in the next four years, it would generate $7 billion to $8 billion in projected future value for Sprint over that period.

How does that work? So they're going to lose 7-8 billion dollars from the iPhone? Sounds like a great way to run a business! Or do they mean it will generate 7-8 billion MORE than the 15 it cost?

 

[wiz329]

How will they be losing 7-8 mil over the next 4 years? You'd think if the iphone would ever pay for itself, it would be at least in the service contracts of the next 4 years. When is the iphone supposed to start paying for itself?

 

[mkrishnan]

How does that work? So they're going to lose 7-8 billion dollars from the iPhone? Sounds like a great way to run a business! Or do they mean it will generate 7-8 billion MORE than the 15 it cost?

C|Net offers more detailed analysis here:

http://news.cnet.com/8301-1035_3-20125836-94/sprint-finally-opens-up-on-iphone-4g-plans/

If this inline works...

They are projecting that they will lose money on the iPhone through 2014 and then start making money on it in 2015. Basically, because iPhone users have traditionally been lower turnover and higher revenue (albeit with fewer carrier options in the past), they "should" be able to make money on them in the long term.

 

[blue22]

Sprint thus far has been great...

Sprint's 3G network is a slightly slower than AT&T's for sure, but it's not that big of a deal in the grand scheme of things.

Overall the network is more consistent and offers better value (unlimited data plan, and free night & weekends starting at 7pm) for similarly priced plans so I'm certain this is going to help Sprint make money/profit off the iPhone in the long run despite their initial upfront commitment. And so far, I've been completely satisfied with their service & network on my iPhone 4S (and I use the web a lot too on the phone) so zero complaints here.

 

[nagromme]

Sprint’s numbers sound wrong

Sprint said it will pay Apple an iPhone subsidy that is 40 percent higher, or $200 more per device, than the subsidies it pays for other phones.

Napkin math:

If $200 is 40% more than other phones, that would mean those other phones (many not even smartphones?) get a $500 subsidy each, and the iPhone gets $700. Those numbers sound way too high to me:

* iPhone unlocked prices (4 and 4S) range from $549 to $849.

* iPhone subsidized prices range from $99 to $399.

* So if Apple charges the carriers the full retail unlocked price, minus what the consumer pays up front, then the carrier’s cost would be $450 per iPhone, across the range.

* But in fact, with a mass commitment like this, Sprint probably doesn’t pay full retail price. (Maybe it varies per model.) It’s got to average somewhere less than $450 per iPhone, right?

Yet Sprint says they pay $500 for non-iPhones (including non-smartphones?) on average, and $700 per iPhone?

For that matter, do those other phone makers have a full $200 of extra margin they can give up to the carrier, vs. what Apple gives? Or do their phones cost $200 less to make? (Maybe so, if many aren't smartphones?) All the numbers sound too high to me.

What am I missing? Sprint’s statement does say “pay Apple,” so they’re not factoring in infrastructure, advertising, or other costs when they’re talking about 40% = $200 more.

Just curious.

 

[mkrishnan]

What am I missing? Sprint’s statement does say “pay Apple,” so they’re not factoring in infrastructure, advertising, or other costs when they’re talking about 40% = $200 more.

I thought it was once rumored that Apple negotiated more for their subsidies essentially as a way to give Apple a share of the monthly revenues the phone generates, but I'm not sure this is true. In that case, it might be that the no commitment / unlocked phone is sort of sold at a lower margin by Apple than the subsidized phones, since they wouldn't make up as much as the carrier pays them. But I'm not sure. On the other hand, this reference:

http://www.wds.co/enlightened/smart...phone_profitability_and_loyalty_wdsglobal.pdf

Estimates that average subsidy paid to the manufacturer by the provider is $200 for all smartphones, so I too tend to think the math is wrong, and they're paying Apple $400-450, which is $200 (more like 100% more) than other smartphones.

As for the component of cost, if it's a higher-end Android phone, it's not going to cost dramatically less than an iPhone to make, and might cost more because the manufacturer lacks Apple's pricing agreements with part suppliers.

 

[RaZaK]

Exactly!!!!!!

Enjoy your 0.15 Mb/s Up/downs

I'm switching back to AT&T before my 14 days is up

 

[briankwest77]

Enjoy your 0.15 Mb/s Up/downs

I'm getting 1.25+ and .60 up most of the time.. I sure enjoy it... thanks.

/b

 

[eastercat]

Wirelessly posted (Mozilla/5.0 (iPhone; U; CPU iPhone OS 4_2_1 like Mac OS X; en-us) AppleWebKit/533.17.9 (KHTML, like Gecko) Version/5.0.2 Mobile/8C148 Safari/6533.18.5)

It's interesting that since sprint got the iPhone, my friends have been talking about switching to sprint or have already switched.
Even though the anecdotal evidence isn't scientific, it does indicate a trend that's reflected in sprint's numbers.

 

[mrgreen4242]

Sprint's 3G network is a slightly slower than AT&T's for sure, but it's not that big of a deal in the grand scheme of things.

Overall the network is more consistent and offers better value (unlimited data plan, and free night & weekends starting at 7pm) for similarly priced plans so I'm certain this is going to help Sprint make money/profit off the iPhone in the long run despite their initial upfront commitment. And so far, I've been completely satisfied with their service & network on my iPhone 4S (and I use the web a lot too on the phone) so zero complaints here.

I'm getting 1.25+ and .60 up most of the time.. I sure enjoy it... thanks.

/b

It's all about where you are located. Some places Sprint plenty fast. Others it's not. I just returned (or initiated the return process at least) 3 iPhones to Sprint. Going to switch to ATT next week sometime, once all the return process is finished.

 

[PPFee]

It's all about where you are located. Some places Sprint plenty fast. Others it's not. I just returned (or initiated the return process at least) 3 iPhones to Sprint. Going to switch to ATT next week sometime, once all the return process is finished.

I agree, We need to have an organized list of user experienced speeds by city/zip code. I have been looking all over for sprint iPhone speeds in new orleans area. Hell id even take some data on their average 3g speed in the new orleans area, not just 4s info. I know it won't get me the average 6 down and 1.2 up, my local att dsl maxes out at 6/512, so I'm amazed with the 4s HSDPA speeds, but equally amazed at sprints righteous prices. WHO DAT!

 

[funkchiro]

Aus store version?

Error

 

[The Past]

Will they unlock the iPhone when they go belly-up?

 

[dacapo]

I don't know what that CEO is taking for medication, but sounds like a terrible investment strategy. Basically they're forecasting a loss of $8+ billion over 4 years to be able to offer the iPhone. And how do they expect to recoup that in years 5 and beyond? It's not like Sprint's iPhone customers will be more loyal to Sprint than to ATT & Verizon.

 

[PPFee]

I don't know what that CEO is taking for medication, but sounds like a terrible investment strategy. Basically they're forecasting a loss of $8+ billion over 4 years to be able to offer the iPhone. And how do they expect to recoup that in years 5 and beyond? It's not like Sprint's iPhone customers will be more loyal to Sprint than to ATT & Verizon.

I think he's getting his meds from AT&T de la vega. Seriously tho, did they actually attribute the entire 8 billion dollar loss to only the iPhone, I've got to believed they tossed in a nice chunk Of money they'll use to transition to a basic LTE footprint. Also as far as loyalty, your right no more loyal are their customers to them, but I do think a lot of their customers are loyal to the almighty dollar, and therefor will stick with sprint unless someone takes their pricing model. They also, in my opinion after selling phones and service from all carriers for years, at the very least In my area, have a strange almost cult-like following in urban areas and amongst the poorer people, at least in new Orleans. I believe it's because of sprints history of having lower deposits, the whole spending limit works well, and of course the cheaper monthly rates.