Sprint to Offer IPhone in Battle With Carriers

By Sarah Frier and Scott Moritz - Oct 5, 2011 3:10 AM GMT+0700
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Tim Cook, chief executive officer of Apple Inc., speaks during an event at the company's headquarters in Cupertino, California, on Oct. 4, 2011. Photographer: David Paul Morris/Bloomberg

Sprint Nextel Corp. (S), the third- largest U.S. wireless operator, struck a deal to offer Apple Inc. (AAPL)’s latest iPhone, joining rivals AT&T Inc. (T) and Verizon Wireless in selling the device.

Sprint will begin selling the iPhone 4S on Oct. 14 along with its competitors. The iPhone 4S uses two antennas to improve call quality and a processor that is seven times faster than the chip in the previous phone, Apple said today at a press conference at its headquarters in Cupertino, California.

“They have been at a competitive disadvantage and this puts them on a level playing field with AT&T and Verizon,” said Michael Nelson, an analyst with Mizuho Securities USA Inc. “They will benefit from improved retention of their customers and a high level of customer upgrades.”

Sprint has been struggling to compete against Verizon Wireless and AT&T, the two largest U.S. wireless operators, which both already offer the Apple device. The Overland Park, Kansas-based company has lost money for 15 consecutive quarters and in July reported a decline in contract customers that was larger than some analysts had estimated. Lack of the iPhone has been the top reason customers choose other carriers, Chief Executive Officer Dan Hesse told investors last month.

Verizon Wireless, which is majority owned by Verizon Communications Inc. (VZ), added the iPhone in February after almost four years of AT&T exclusivity. In the second quarter, the first full quarter with two iPhone carriers, AT&T activated 3.6 million of the devices, while Verizon, the largest wireless carrier, activated 2.3 million.

Boost Sales

Sprint gained 13 cents, or 4.8 percent, to $2.86 at 4 p.m. in New York Stock Exchange trading. The stock has dropped 32 percent this year.

Sprint may add 214,000 new contract subscribers this year with the iPhone, compared with 855,000 customers it lost last year, said John Hodulik, an analyst with UBS AG, who rates the shares “neutral.” Hodulik estimates Sprint will sell 1.2 million iPhones in the fourth quarter, with about 25 percent of those coming from other carriers.

Sprint will offer the phone with unlimited data service and plans to distinguish itself from AT&T and Verizon Wireless, people familiar with the matter said last month. That could draw customers away from the other carriers, said Todd Rethemeier, an analyst at Hudson Square Research in New York.

Sprint already offers unlimited data plans for smartphones such as Research In Motion Ltd. (RIMM)’s BlackBerry and HTC Corp. (2498)’s Evo, which runs on Google Inc. (GOOG)’s Android operating system.

To contact the reporter on this story: Sarah Frier in New York at sfrier1@bloomberg.net; Scott Moritz in New York at Smoritz6@bloomberg.net

To contact the editor responsible for this story: Peter Elstrom at pelstrom@bloomberg.net