Sprint's Costs for iPhone and LTE Are Going to Strain the Company

After being criticized for refusing to disclose iPhone costs at an Oct. 7 conference, Sprint Nextel Corp. revealed key details of its recent deal with Apple to sell the company’s smartphone. While Sprint execs expect the launch of the successful device to further the company’s turnaround as the nation’s third largest operator, it appears Sprint will have to put out now to see the results later. 

In an outline of their agreement with Apple, Sprint disclosed the $15.5 billion cost for a four-year commitment with the Cupertino company. In addition, Sprint must also seek $7 billion from financial markets in the next few years to aid in the iPhone introduction, which will also require the carrier to undergo a big network upgrade.

The iPhone is likely to put new stress on the Sprint’s network, as such devices encourage heavy data use among customers. While Sprint continues to market unlimited data plans to new subscribers, it has only just begun developing an LTE network, while rivals AT&T and Verizon have already offering 4G using this high-speed wireless standard. 

With the iPhone in its lineup, Sprint expects a substantial long-term payoff of $7 billion to $8 billion more than it otherwise would have earned, though these benefits will most likely not be apparent until 2015. That calculated gain weigh against the $15.5 billion Sprint has currently committed to spend on selling iPhones, despite Sprint only recouping part of the commission when a customer signs up for the Apple smartphone. 

Sprint said it was negotiating a new deal with its biggest client, Clearwire Corp, though it did not go into any details. The company also announced that it cut its net loss to $301 million in the third quarter, making it the smallest loss Sprint has suffered since a consecutive string of defeats began in 2007.