Sprint CEO defends iPhone strategy

21 Mar 2012

EXCLUSIVE VIDEO: Sprint CEO Dan Hesse has defended the US operator’s decision to begin offering the iPhone in a bid to attract new customers despite the risk of the heavy subsidies it must pay to Apple eating into its revenue.

In an exclusive video interview with Mobile World Live, Hesse said that Sprint’s early iPhone sales had “exceeded expectations” and were allowing it to steal subscribers from rivals Verizon Wireless and AT&T.

“What’s unique is that four out of every ten iPhones we sold [in Q4] 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.”

“Subsidises are heavy for the iPhone – this is the reason why a high percentage of new customers is important,” Hesse added. “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.”

Sprint’s share price saw its biggest fall in three months this week after the US number-three operator was downgraded to "underperform" by an influential investment research firm. Sanford C. Bernstein predicted Sprint will fail to sell enough iPhones to cover its high cost commitment to Apple for the right to carry the device

The company has committed to a US$15.5 billion four-year agreement with Apple to sell 25 million to 30 million iPhones over the period.

But Hesse is banking on the firm’s commitment to offering unlimited smartphone data as a key differentiator that will set it apart from other US iPhone operators.

“The marriage made in heaven is ‘unlimited’ plus the iPhone,” he said. “My plan is to continue [the unlimited data offering] 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.”
Elsewhere in the interview, which was conducted at last month’s Mobile World Congress, Hesse also updated on Sprint’s LTE rollout and shared his thoughts on future consolidation in the US mobile market following the collapse of the AT&T/T-Mobile USA merger.

View the full video interview here.