Is Sprint’s bet on the iPhone paying off, or costing it a pretty penny? In the company’s Q4 earnings, the carrier boasted that 40 percent (720,000) of all iPhone sales were going to new customers, with 1.8 million iPhone users added overall in the crucial holiday sales quarter. But those sales appear to be coming at a price for Sprint…
They also contributed to a reduction in the company’s operating income (OIBDA), which dropped down to 10.8 percent ($842 million). Sprint (NYSE: S) said if you factored Apple (NSDQ: AAPL) and its ongoing network consolidation program Network Vision out of the equation, it would have had an OIBDA margin of 18.8 percent.
Sprint sells both the iPhone 4 and the iPhone 4S.
Sprint didn’t break out Apple from Network Vision, but in the words of one Barclays analyst quoted by Bloomberg, “The financials are weak due the amount of money they are sending to Cupertino.”
Before Sprint had officially announced that it would carry the iPhone, there were reports of how much it was going to cost the company: one report, from the WSJ, pegged the cost at $15.5 billion over the next four years, with Sprint paying Apple $200 more for each iPhone than it does for other smartphones it sells to customers.
We’ll have to watch how sales continue to develop over future quarters, but for now Sprint is not benefiting as much from the new product as its competitors in terms of actual unit sales (and subsequent subscribers) either: AT&T (NYSE: T) in the last quarter sold 7.6 million iPhones and Verizon sold 4.3 million, compared to Sprint’s 1.8 million.
Sprint also reported that its net loss has grown by 40 percent since the same quarter last year, and now stands at $1.3 billion. Total revenues were up by five percent to 8.7 million.
Overall customers now stand at 55 million, with total net subscriber additions for the quarter at 1.6 million, the highest since 2005.
Updates from the analyst call:
“We made a conscious decision to avoid chasing out net adds” by discounting the iPhone to better compete against other carriers, said CEO Dan Hesse.
He also noted that the 40 percent gross iPhone-add mix, “far exceeded” that of Sprint’s competitors. Even if that may be costing Sprint now, Hesse said this is the best indication of long-term profitability.
A sign of the times and sharp shift to smartphones in the U.S.: some 86 percent of post-paid smartphone adds were smartphones, said Sprint.
Sprint called 2012 an “aggressive investment year” for capex, expected to be $6 billion excluding interest, as the company looks to expand the Network Vision upgrade program.