iPhone Carriers: 10 Reasons Why It's Not So Hot

 
 
By Don Reisinger  |  Posted 2012-02-09 Email Print this article Print
 
 
 
 
 
 
 

Sprint might have the iPhone now, but its deepening losses illustrate just how bad it is to be an iPhone carrier nowadays.

Sprint had an awfully disconcerting story to tell Feb. 8 when it announced its fourth-quarter earnings.

Although Sprint saw revenue rise and its subscriber base gain ground on the competition, its operating income slid nearly 11 percent. Although Sprint didn€™t dive too deeply into how the iPhone impacted its financial performance, the company did acknowledge that Apple€™s devices contributed quite a bit to its issues.

Sprint€™s troubles over the last quarter underscore something the company might not have realized would happen when it first inked its deal with Apple: Partnering with the iPhone maker is by no means fun. In fact, becoming a carrier partner with Apple is a lot like giving away the vast majority of profits and taking on all the risk and expenses. Sure, it€™s great to offer the iPhone, but at the end of the day, it isn€™t nearly as great as Apple and its fans would have you believe.

Here€™s a look at the problems all three of the major carriers inherit when they carry the iPhone.

1. Losses mount

As Sprint€™s performance has shown, selling iPhones at a rapid rate does not mean that it€™ll translate to profits. In fact, there€™s a good chance that due to the extreme subsidies that are required on Apple€™s devices, losing money at the end of the day is a real possibility. Plan sales could help, of course, but that€™s not enough for a small carrier like Sprint.

2. Being late to the game doesn€™t guarantee strong sales

So far, AT&T is the only major U.S. carrier that has benefited greatly from having the iPhone. The carrier has watched its subscriber numbers and revenue soar. Meanwhile, Verizon Wireless and Sprint, while seeing that effect on their own front, haven€™t seen it to such a degree. Being late to the iPhone game doesn€™t guarantee good results.

3. Apple has too much power

Apple is quite powerful when it comes to parts suppliers, but it€™s also a huge threat to carriers. The company dictates terms for its iPhone, provides little information, and along the way ensures that it will maintain its power for as long as possible. It€™s a nightmare scenario for carriers.

4. Huge subsidies are required

Apple sells its iPhone for $600 and up. So, in order to bring the device down to a level that consumers would actually find appealing, carriers must offer them at a discounted rate of, say, $199 or $299. Meanwhile, they have to hope to make up the shortfall on more subscribers and plans. It€™s not so easy to do.



 
 
 
 
Don Reisinger is a freelance technology columnist. He started writing about technology for Ziff-Davis' Gearlog.com. Since then, he has written extremely popular columns for CNET.com, Computerworld, InformationWeek, and others. He has appeared numerous times on national television to share his expertise with viewers. You can follow his every move at http://twitter.com/donreisinger.
 
 
 
 
 
 
 

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