Can Sprint thread the iPhone, unlimited data plan needle?
Sprint on Thursday confirmed that it will offer unlimited data plans when it launches the Apple's iPhone 4 and iPhone 4S on Oct. 14, but it's unclear whether its network can handle the strain and what the costs will be.
In a statement, Sprint touted its unlimited data plan. Sprint CEO Dan Hesse, who will have a lot of explaining to do during Friday's analyst meeting, said:
Our unlimited data plans are the perfect fit for iPhone customers. Sprint’s unlimited data plans provide more value than metered plans from other carriers.
Few customers will argue with Hesse's take. Wall Street is a different story. Sprint reportedly will spend $20 billion in guarantees to Apple in a big bet that it can add customers and ultimately make money. However, if there's an influx of iPhone users, Sprint will have to spend more on its network.
Threading that needle between new customers, network investments and a heavy debt load is Sprint's biggest challenge.
Analysts are mixed on the prospects. For instance, Atlantic Equities analyst Chris Watts said he believes Sprint can realistically hit the 30 million handsets it promised Apple it would buy.
Among the key points:
- Sprint won't compete on price because its unlimited data plan will be different.
- Sprint will be able to acquire customers and keep them.
- But there will be network costs ahead.
On the network costs, Watts said:
We are keen to hear Sprint justify its confidence that it can retain its Unlimited data product with the iPhone. One risk we can see is that the need to pull in iPhone customers means that Sprint keeps its Unlimited data offering longer than it might otherwise have done, putting pressure on network capacity and quality. There are some mitigating factors in Sprint’s favor here - iPhone users use less data on a per subscriber basis than Android customers, hence Sprint will have to be meaningfully more successful in terms of gross adds with the iPhone than it would with Android based Smartphones. A further offset is that increased iPhone uptake could also mean reduced WiMAX uptake, which would see lower payments to Clearwire going forward. However, overall data usage per customer will continue to rise, and if Sprint sees substantial migration from non-Smartphone users (who would not otherwise have switched) thanks to the iPhone, this remains a risk.
Other analysts noted that the iPhone will occupy most of Sprint's strategy day on Friday. However, Sprint's network vision strategy will be a close second. Kaufman analyst Ben Abramovitz said:
The largest single risk for the company's investor day on Friday, in our view, will be management's ability to control the agenda. Investors are expecting incremental clarity on so many items including the debt refinancing, Network Vision, 4G strategy, iDEN, and the iPhone that management can potentially fail to satisfy shareholders if the agenda maintains a narrow focus and becomes more of a marketing event. Management's failure to appease investors has the potential to keep Sprint's funding costs elevated into a significant debt maturity in early 2012 and put executive positions in jeopardy considering the recent stock price declines, in our opinion.
Related: Apple's iPhone 4S is swell, but pricing is the real killer app