In its Sprint’s 10-K report — as noted by “Barron’s” (http://macte.ch/kSPs7) — for the fiscal year ending in December, Sprint said its sales of Apple’s iPhone will cause its profit in wireless to decline this year, because of a higher average subsidy on the iPhone than for other mobile handsets. Still, it’s planning on buying a lot more Apple smartphones.
During 2011, Spring entered into a purchase commitment with Apple to purchase a minimum number of smartphones, which on average, is expected to carry a higher subsidy per unit than other smartphones the telecom sell. Sprint said it has an obligation to purchase at least US$15.5 billion worth of iPhones from Apple under their agreement, and said it expects to purchase more than that:
“In September 2011, we entered into a four year commitment with Apple, Inc. to purchase a minimum number of smartphones, which on average, are expected to carry a higher subsidy per unit than other smartphones we sell,” Sprint says in its 10-K report. “Our minimum commitment under this arrangement is approximately $15.5 billion; however, we expect our actual purchases will exceed this amount. This will result in an expected increase in cash outflow and reduction in operating income in the earlier years of the contract until such time as we may recover the acquisition costs through subscriber revenue.”