Sprint Expected to Hold Steady on Upgrade Policies Ahead of Next iPhone

Written by Josh
May 25, 2012

Sprint started selling the iPhone last year and has reported success, though analysts say customer upgrades have hurt margins at U.S. carriers who subsidize expensive phones like Apple's device.

Sprint Nextel Corp. has implemented some stricter upgrade policies that a financial analyst anticipates will continue ahead of Apple’s launch of its next iPhone.

“With reduced subscriber estimates and a need to reduce free cash flow losses, we even expect Sprint to hold firm on its stricter upgrade policies heading into the next iPhone launch,” BTIG Research analyst Walter Piecyk wrote May 16. “Sprint CEO Dan Hesse is prepared for the increased churn that could occur by customers that might flee in search of a subsidized iPhone on another carrier.”

Sprint started selling the iPhone last year and has reported success, though analysts say customer upgrades have hurt margins at U.S. carriers who subsidize expensive phones like Apple’s device. Other carriers including Verizon Wireless have enacted measures, such as a one-time fee, to help compensate for the costs of the upgrades.

Sprint reported last month that 8 percent of Sprint platform postpaid customers upgraded their handsets in the first quarter. That’s down from 9 percent in the year-ago period and in the fourth quarter of 2011. ” The year-over-year decline was primarily due to changes in our upgrade eligibility policies,” Sprint explained in its first-quarter results.

Sprint, the third-largest U.S. wireless carrier, has at least one thing going for it when it comes to the iPhone. It relies less on upgrades than on sales to new subscribers, according to Piecyk. In the first quarter, Sprint sold 1.5 million iPhones with 44 percent of the devices going to new customers.

MetroPCS CFO Braxton Carter reportedly said at a financial conference that Sprint’s more relaxed credit standards boosted its iPhone numbers, although BTIG Research didn’t buy that argument.

“We note that Carter had to alert investors to a weaker outlook for MetroPCS a week after reporting what appeared to be a strong quarter and when according to the WSJ they had almost sold the company to Sprint,” Piecyk wrote.