CUPERTINO (CBS / AP) — Sprint Nextel Corp. has committed to buying more than 30 million iPhones over the next four years, imposing a heavy burden on an already cash-strapped company, according to a report published Monday.
The Wall Street Journal’s online edition attributed the report to unnamed sources. Apple Inc. is expected to a reveal the first new iPhone model in more than a year on Tuesday.
The paper previously reported that Sprint Nextel Corp. will sell the iPhone, which has been exclusive to AT&T Inc. and Verizon Wireless.
In Monday’s story, the Journal said CEO Dan Hesse had told Sprint’s board that the company would lose money on the deal until 2014. Sprint has posted a loss for every quarter since 2007.
Sprint shares fell 31 cents, or 10.2 percent, to close at $2.73, a three-year low.
Apple and Sprint did not respond to requests for comment.
Sprint, the country’s third-largest wireless carriers, is losing subscribers to the two bigger wireless companies. The fact that Sprint hasn’t been able to sell the iPhone is one of the main reasons. The Journal said the board considered the chance to sell the iPhone as a make-or-break proposition.
Sprint has 33 million subscribers on contract-based plans, so its reported commitment means it would have to convert half of them to iPhones, assuming they upgrade after two years.
At current prices 30 million iPhones would cost Sprint about $20 billion. Assuming it charges $200 for them, Sprint’s iPhone sales could amount to about $6 billion. The company hopes to make up the difference on contract sales and service.
Currently, Sprint buys phones for about $7.4 billion per year. Its iPhone commitment corresponds to spending two-thirds of that on iPhones every year.
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