With the wireless industry moving towards LTE as the two largest U.S. carriers, Verizon (NYSE:VZ) and AT&T (NYSE:T), roll out their nationwide LTE networks, it seems increasingly likely that the next generation iPhone will come enabled with 4G LTE support. As a precursor to that event, Apple has already released the new iPad in an LTE variant with Qualcomm’s baseband chipsets. Further, Qualcomm has also come out with 28nm Gobi chipsets that conserve on space and power, potentially removing two of the biggest obstacles that have come in the way of an earlier LTE iPhone release.
As an LTE iPhone looks increasingly imminent, the pressure on latecomer Sprint (NYSE:S) to deliver on its aggressive LTE rollout plans is growing.
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Huge bet on the line
Sprint has made a huge $15.5 billion commitment to buy iPhones from Apple over a four-year period in order to staunch the sustained postpaid subscriber losses that it has been incurring since the integration of Nextel’s iDEN network. It has also tapped the debt markets twice in the last four months in order to roll over existing debt and conserve cash to pay for the expensive iPhone deal as well as upgrading its network to LTE. While Verizon and AT&T have a widely deployed LTE network already, Sprint has yet to come out with its first LTE market. In order to bridge the gap, Sprint is looking to spend huge amounts on its Network Vision Plan this year.
But all that investment may amount to nothing if it fails to get its LTE network up and running in a few major markets at least by the time Apple releases the iPhone 5.
Sprint tries to downplay concerns, but we’re not satisfied
Sprint’s CFO, Joe Euteneuer, tried to alleviate these concerns saying that the deal its deal is similar to both Verizon and AT&T’s, and will hence be able to offer the next iPhone irrespective of where its LTE coverage stands then. He then went on to surmise that if Apple releases the iPhone at the time as it did last year, Sprint will have had covered enough major markets by then for it to be disadvantaged at all. 
However, Apple has a track record of being highly unpredictable. Apple may have deviated from its usual June release date last year, but that in no way guarantees that the next iPhone will be released in October again. If Apple chooses to revert back to its earlier June release date, Sprint will be in trouble as it will have its LTE network ready in only six cities by the midyear. This of course assumes it will be able to deliver on its current plans LTE plans. If not, its situation could be even more dire.
While the risk that Sprint may not be able to offer the iPhone at all if its LTE network is not ready by the iPhone launch date is non-existent now, the fact that competing wireless carriers offering the iPhone have a much wider LTE coverage could deter subscribers from choosing Sprint if the smartphone comes with minimal upgrades other than LTE.
While that may reduce the number of new iPhone subscribers joining Sprint, we do not foresee any mass defections however as that would entail forking over huge penalty fees for breaking the two-year contract. Sprint only started offering its first iPhone late last year when the iPhone 4S was released.
- Sprint Free To Offer Possible Future 4G LTE IPhones, CFO Says, Nasdaq.com, March 27th, 2012 [↩]