Is the Apple iPhone Too Expensive for Cell Carriers to Profit?

By Rob Scott
February 14, 2012

U.S. wireless carriers are reportedly struggling with the cost of offering iPhones to their customers.
Sprint Nextel, for example, began selling the Apple phone during the recent quarter and saw a net loss of $1.3 billion, a major factor of which was the cost of purchasing 1.8 million iPhones.
“Companies like Sprint purchase the iPhone from Apple Inc., then resell it to their customers at steep discounts — essentially swallowing the difference,” reports the Los Angeles Times. “Carriers hope to make an eventual profit from users’ monthly subscription fees, but Sprint, AT&T and Verizon have found that big profits from the popular phone are hard to come by.”
AT&T “found that its profit margins were being squeezed by subsidizing the cost of the device,” explains the article. AT&T told investors last year that profits would recover, but by late January, the company experienced a drop in stock “largely because it was selling so many iPhones to customers.”
“We continue to believe the iPhone will bring significant value to Sprint over the long term, and early results are in line with or better than our business case assumptions,” said Daniel R. Hesse, Sprint’s chief exec.

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