Market Rumor? Sprint Allegedly Agrees to Purchase 30.5 Million iPhones in Return for Exclusive iPhone 5 Deal

Here is an interesting story from the Wall Street Journal (WSJ):

Sprint Chief Executive Dan Hesse told Sprint's board in August that the carrier would have to agree to purchase the iPhones over the next four years—a commitment of $20 billion at current rates—whether or not it could find people to buy them, according to people familiar with the matter.

Other sources corroborate the claim. According to infomobile and PCMAG.com, Sprint has indeed agreed to purchase 30.5 million iPhones from Apple at a value of $20 billion.

Why?

Sprint is the no. 3 wireless carrier service in the nation and they have not posted profit since 2006.

"This is a bet-the-company kind of thing,'' said a person familiar with Sprint's decision making. The projected hit to the company's operating income is "staggering," the person said to the WSJ.

What about this deal makes them think that it will put them on top?

Well, according to Jonathan S. Geller of BGR:

I have been told that Sprint will be getting the iPhone 5 — yes the real iPhone 5, not the iPhone 4S — as an exclusive. And it will be a 4G WiMAX device. AT&T and Verizon would launch the iPhone 4S and get the iPhone 5 some time in the first quarter of next year as an LTE device. Globally, the iPhone 5 might be available as a 4G HSPA+ device.

Really? That may actually put them in the lead. Also, it would not be impossible for Sprint to sell the 30.5-32 million iPhones under its contract to Apple. After all, AT&T and Verizon together sold nearly 12 million iPhones in the first half. And a boost from an exclusive iPhone 5 deal may actually put them over the top.

Gigamon weighed in on the issue:

Electronista reports that despite the talking-about-it-without-really-talking-about-it routine, Hesse “framed [the iPhone] as the key to Sprint’s future business,” saying that the “number one reason customers churn” was “because of the iPhone.”

Wednesday morning AllThingsD said to expect Apple to unveil the iPhone 5 on October 4.

In this scenario, according to BGR, Sprint's new iPhone 5 will offer:

• Faster CPU.
• Larger 4-inch screen, similar to LG’s NOVA display but with a higher resolution.
• 1GB of RAM.
• Slightly larger design overall, but thinner and with a larger battery.
• 32GB of storage.
• iPhone 5 exclusive software and APIs (Assistant).
• Dedicated Assistant button, possibly integrated with the new home button

Whereas, according to FOX news, the iPhone 4S will only feature the following:

• A low voltage Apple A5 CPU (it won’t be the same as the iPad 2 chip, clock for clock)
• Updated front and back camera sensors. FaceTime HD in the front, 8-megapixel 1080p HD video recording in the back
• Multiband 3G Qualcomm chipset — North American & international bands for AT&T and global carriers, North American CDMA & international bands for Verizon and Sprint
• NFC support
• Metal or “premium” plastic on the back case

The Journal sums it up:

If Sprint has bet right, the iPhone will be the device that finally breaks the company's half-decade-long slide and keeps much larger rivals Verizon Wireless and AT&T from running off with the bulk of the wireless industry's subscribers and profits. If it's wrong, the iPhone deal will saddle the company with a costly albatross at a time when it is already stretching to manage an expensive network upgrade and cover debt payments.

The fact that AT&T has consistently ranked dead last in terms of service could also give Sprint with the boost that it needs. Furthermore, the fact that Sprint needs to differentiate itself in order to beat out market competition might imply that it will be offering charge-free data plans to “poach” customers from both Verizon and AT&T.

"Interestingly, according to Bloomberg, the Sprint iPhone will be available with an unlimited data plan, which would help set the device apart from rival AT&T and Verizon-powered devices," reports the Christian Science Monitor.

But as the iPhone spokesperson said, it could all just be speculation and rumor.

Final word from BGR:

I told my source that even if Sprint paid Apple hundreds of millions, a Sprint iPhone 5 exclusive still would never happen. $20 billion in guaranteed iPhone sales, though? We’ll see tomorrow.

Update: Apple unveiled the iPhone 4s (which will be available to sprint) but there is no iPhone 5.

"Subscribers of the ailing company will be able to use the iPhone for the first time when Apple releases its latest model, the 4S, on Oct. 14," reports the Associated Press.