Sprint Apple iPhone 4S a necessary evil

Sprint will indeed be a recipient of the newest Apple iPhone, Apple CEO Tim Cook confirmed yesterday, though the carrier has yet to say much about it. This hasn't stopped analysts, however, who fear that the iPhone — while necessary for Sprint to effectively compete against Verizon and AT&T — may drive it deeper into a financial hole. (Unfiltered: Is Sprint 'betting the company' on iPhone 5 deal tomorrow?)


"We're delighted to announce our relationship w/ Apple," Sprint Tweeted yesterday, mostly in response to confusion over its quietness. "Stay tuned for more info... We still have an official announcement to make as well..."

Sprint plans to reveal network "strategy" details during an Oct. 7 event — the same day that pre-orders can be placed for the Apple iPhone 4S — and one suspects they're carefully crafting an argument that will help to assuage investors.

Each iPhone 4S will cost Sprint approximately $600, and the carrier has committed to buying at least 30.5 million handsets over four years, which could total nearly $20 billion at current rates, according to a report from Bloomberg.

There's a fear that Sprint's operating margins could drop to as low as 9.8% from its current 16%, Barclays Capital Analyst James Ratcliffe told Bloomberg, adding that the iPhone 4S may cost Sprint $150 more than other smartphones in its portfolio. Reuters adds that Sprint may lose money on the iPhone until 2014. And still, Ratcliffe and others agree that the short-term hit is necessary for Sprint's long-term success.

Also not great news for Sprint, according to the Bloomberg report, is that the iPhone 4S will be twice as fast on the GSM-based AT&T network, but on the CDMA-based Sprint and Verizon networks, "there's no comparable speed jump."

"Whilst Apple announced improvements in the hardware performance and on the service layer, it has been let down somewhat by having almost no change in the user experience and in the industrial design," David McQueen, a principal analyst with Informa Telecom & Media said in a report yesterday.

"Unfortunately for Apple, this is happening at a time when competitors are aggressively bringing new products to market with superior user experience in the form of wider and better screen, intuitive UIs, and more integrated apps," McQueen continued. "As a result, iPhone 4S could be the first disappointing device since the launch of the brand."

McQueen added that price reductions to the iPhone 4 and 3GS could perhaps "create opportunities in the mass market without actually having to report to a lower-cost new product."

These aren't opportunities, however, that will benefit Sprint.