Sprint Nextel saw its biggest surge in new customers in six years, thanks to the iPhone, but that growth came at a hefty price, reports C/Net.
Sprint activated 1.8 million iPhones in Q4, with 40 percent of those activations from customers new to Sprint. Sprint offers an unlimited data plan alongside the iPhone. Sprint now serves more than 55 million customers – the highest level ever, according to their year end report.
But Sprint reported a loss of $1.3 billion, or 43 cents a share, on revenue of $8.72 billion in the fourth quarter. That compares with a loss of $929 million, or 31 cents a share, on revenue of $8.3 billion in the year-ago quarter. After selling nearly 2 million iPhones last quarter, Sprint’s adjusted wireless margin fell to 9.5%, down from 16% a year ago.
Sprint Nextel has 33 million postpaid subscribers (28.7 million on the Sprint platform and 4.3 million on the Nextel platform), 14.8 million prepaid subscribers (12.8 million on the Sprint platform and 2 million on the Nextel platform) and approximately 7.2 million wholesale and affiliate subscribers, all of whom utilize the Sprint platform.
“The iPhone is a nightmare for carriers,” reports CNN. “The iPhone may be great for consumers, but takes a nasty toll on wireless carriers’ bottom line.” Verizon averaged a profit margin of 46.4% per quarter before the iPhone. In the first quarter that the iPhone went on sale, that fell to 43.7%. Last quarter, when Verizon sold a record 4.2 million iPhones, its margin sunk to 42.2%.
Over the past five years, Morgan Keegan analyst Tavis McCourt figures its mobile computing revenue in the fourth quarter of 2011 — $71.4 billion — is about twice what it was in the fourth quarter of 2007 — $37.9 billion.
“Apple is dominating the industry’s pool of profits,” says McCourt. “With about 11 percent of industry shipment volumes of smartphones and tablets, Apple generates about 47 percent of the industry’s revenues, and over 80 percent of its operating profits.”