Published March 21, 2012
Sprint chief executive Dan Hesse is being watched closely by the company’s board of directors, but the CEO has to answer to investors and subscribers as well. Last year in October, Hesse revealed that the company is placing a massive $15.5 billion bet on Apple’s iPhone, and in a recent interview with the GSMA’s Mobile World Live blog, Hesse defended the move, which has been criticized by a number of industry watchers.
“Subsidies are heavy for the iPhone. This is the reason why a high percentage of new customers is important,” Hesse said during the interview. “But iPhone customers have a lower level of churn and they actually use less data on average than a high-end 4G Android device. So from a cost point of view and a customer lifetime value perspective. They’re more profitable than the average smartphone customer.”
Hesse stated that iPhone sales have “exceeded expectations” thus far, and he claimed Sprint is stealing customers away from AT&T and Verizon Wireless thanks to the iPhone. ”Four out of every 10 iPhones we sold [in the fourth quarter] are for new customers. That’s roughly double the rate of either of our competitors, so we’re pulling a lot of customers from our competitors,” he said.
The CEO points to Sprint’s unlimited smartphone data offering as a key differentiator for the carrier as compared to its competitors. ”The marriage made in heaven is unlimited plus the iPhone,” he said during the interview. “My plan is to continue for as long as we can, hopefully forever. The customers have spoken very clearly on this: they like simplicity and unlimited. It’s a differentiator in the market.”
Sprint executives are always careful to note that they hope to continue offering unlimited data for as long as the company can, constantly reminding us that this careful balancing act could topple at any time. The carrier recently announced that it was capping data usage for the mobile hotspot feature available on many smartphones, and mobile broadband plans were capped late last year as well.
Sprint has its work cut out, but not everyone is convinced the carrier can continue to compete with industry giants Verizon Wireless and AT&T. Bernstein analysts recently projected that Sprint will not sell enough iPhones to cover its $15.5 billion commitment, and one analyst with the firm, Craig Moffett, said on Tuesday that the iPhone could be part of a perfect storm that drives the carrier into bankruptcy.