Sprint made a big bet yesterday. They agreed to buy 30.5 million iPhones over the next four years. The deal is fixed, meaning Sprint is obligated to buy the phones, regardless of whether or not they can sell them. That’s a 20 billion dollar commitment.
To sell that many iPhones, Sprint would have to double its rolls of contract customers, convert all of them to the Apple device or a combination of the two.
Read more WSJ
The Sprint subscriber base is only 27.4 million. This makes the deal a monumental commitment requiring Sprint to substantially grow it’s subscriber base as well as maintain it’s existing users. For the deal to work, Sprint would have to double its number of post-paid or contract customers or convert all of it’s existing customers to the iPhone. This is a huge bet for Sprint. The cost of failure is high, potentially taking the company down. It is a huge hit on operating profit over the next 2 years and Sprint has not had a full year of profit since it bought Nextel 7 years ago.
According to Sprint’s CEO, Dan Hesse, “the lack of the iPhone is the number one reason customers leave or switch.”
It’s clear Sprint feels it needs the iPhone. They’ve just bet the farm on it. Sprint has been a distant 3rd in the mobile space for quite sometime. They see the iPhone as a way to keep from falling further behind and maybe even a way to gain some ground.
What concerns me the most about this deal, isn’t the massive commitment, (which does scare me), but what appears to be the lack of a substantial sales go to market plan. There has been little discussion from Sprint on HOW they are going to sell that many phones and what their go-to-market strategy will be. For Sprint to captialize on this commitment it is going to require a flawless, compelling, well executed sales plan. Sprint is going to have to convince a lot of people to buy the iPhone from them and not Verizon or ATT. Accomplishing that is going to be a challenge for Sprint.
Sprint’s go to market plan today focuses around a 79.99 unlimited data plan, the largest 4G network, (currently it’s not known if the iPhone 5 will have 4G) and customer service. The question now is, is that enough to entice new iPhone subscribers to switch to Sprint? I don’t think it is. Sprint is going to have to do more to make this deal work. They are going to need to get creative to sell 30.5 million iPhones in 3 years. Relying on an aggressive phone subsidy ($500), 4G, customer service and a competitive unlimited plan is a start, but it won’t get them across the finish line.
Bringing on the iPhone may have been something Sprint had to do. But it’s not panacea. To offset the risks, Sprint is going to need to more than compete on price and I don’t know if they have anything more. This is a big bet for Sprint. It’s an even BIGGER bet without a strong go-to-market sales strategy.
In a recent Mashable iPhone 5 survey, asking what features users most wanted to see in the new iPhone 5, only 5% said Sprint availability. This small number doesn’t bode well for Sprint out of the gates. It says, exactly what I think. Sprint has lot of sales and marketing to do if they want this deal to work.
Sprint is going to need to find a way to embed itself in the smartphone/iPhone discussion. They are going to need to connect with smartphone users and change the conversation. Traditional mobile go-to-market approaches won’t cut it.
Sprint made a big bet yesterday, but it wasn’t on the iPhone. The big bet was on their sales and marketing engine. The only question now is; does Sprint recognize this?
- Did Sprint Go All-In For The iPhone 5? (techcrunch.com)
- Sprint getting iPhone 5 thanks to $20 billion deal? (intomobile.com)