Sprint gained customers last quarter but lost money from subsidizing iPhone sales, as its expensive gamble fell short of expectations.
Sprint's decision to offer the iPhone added subscribers, but the costs associated with selling Apple's smartphone ended up hurting the company's bottom line. The company reported a $1.3 billion loss, though it saw its biggest surge of customer sign-ups in six years.
Like Verizon and AT&T, Sprint subsidizes the cost of the iPhone to attract customers, and the initial costs damaged the company's profits. Sprint sees the losses as necessary because it lost customers to rivals AT&T and Verizon, which both offer the iPhone. The Overland Park, Kan.-based carrier trails behind these two major carriers and bet big that offering the iPhone would help stem that tide.
Sprint's losses turned out smaller than anticipated, primarily because it did not sign up as many new subscribers as predicted. Sprint pays Apple a hefty sum to carry iPhones, and the company expects losses until 2014 due to the high cost of this investment.
Sprint CEO Dan Hesse committed to Apple's popular iPhone to regain base customers and compete to attract new customers. Sprint justified the financial hits from acquiring the iPhone because customers' monthly data and calling fees would eventually compensate for the costs.
Since Sprint aimed to gain more customers with its iPhone gamble, its failure to attract the predicted number of users is more worrisome to the company than its lackluster bottom line.
Sprint's iPhone-selling rivals also posted losses associated with selling the product at a loss, but both AT&T and Verizon sold significantly larger numbers of the device.
Sprint's rivals also have traction with established Apple customers, since the companies have sold the product longer. Sprint emphasized its unlimited data plans to lure iPhone customers, but consumers failed to bite.
AT&T and Verizon depend on iPhone sales for their profits, but both companies are now looking to diversify their offerings and establish new niches. AT&T is banking on the Nokia 900, running on Windows, and a move to 4G LTE.
Verizon is also spurring 4G LTE sales with a double-data promotion on Motorola's Droid handsets.
Sprint continues to focus primarily on the iPhone while its competitors are attempting to set up firm footing selling the next big thing. The company's disappointing subscriber numbers, coupled with its overall losses, show that the company's strategy may need adjustment. Sprint faces an uphill battle if the company continues to follow in its rivals' footsteps without trying new tactics.
