Paul Grim: Sprint Bets the iFarm

Here we go again.

Repeatedly, Sprint has tried to bet the farm (and failed) in its quest to remain relevant. They bet the farm on Nextel, then Wi-Max and Clearwire, then all-you-can-eat plans, and all along on wholesale/MVNO. Frankly, it’s amazing they have any farm left to bet – having lost 80% of their market value since the first iPhone went to market in 2007.

But now they have allegedly placed every last chip on the table, plus the car and house keys and maybe their firstborn: they apparently have agreed up-front to purchase 30.5 million iPhones over the next four years, estimated at $20 Billion, regardless of whether they sell through to consumers. Rumors are they may even get the iPhone 5 as an exclusive for a while, as well they should with that price tag.

Leaving aside whether Sprint can survive this bet (who knows?), this is a complete game changer for the wireless ecosystem. Last year I suggested the iPhone was the Maserati to Android’s Ford Taurus (not a perfect analogy but you get the drift). This news is almost as if GM decided in a desperate measure to stop production of their entire product line, pre-pay Maserati for four years of commitments, and start selling them at Ford Taurus prices. A-mazing.

So as consumers, what does this mean? Bonanza. You now have the choice of the iPhone 4 (and someday the 5) with data caps, bloatware, obscene international roaming charges, spotty network, and so on – or the iPhone 5 with all-you-can-eat bundles, WiMax speeds, and lower charges across the board. At a minimum, this will go a very long way to tame the duopolistic tendencies of the Big Two carriers in the US.

What this means for Android is less clear. Google has successfully positioned Android as the faster-growing, low margin, multi-OEM alternative to the iPhone ecosystem. Buying Motorola Mobility complicates that, as does Amazon’s successful OS hacking for the Kindle Fire. But this Sprint deal is the biggest blow of all: at Sprint fire sale prices, we’d all rather buy an iPhone than a Droid. The Android team may be best served by aggressive forward integration into the hardware business with Motorola and make some magic before the OS fragments away into oblivion.

The other big loser here is AT&T. Verizon can certainly survive this, given the strength of their network and size. However, AT&T is in the process of losing the T-Mobile acquisition, and if the inMobi survey is anywhere close to accurate, 41% of all mobile users intend to purchase the iPhone5. Any AT&T customer (iPhone owner or not) will be giving serious consideration to switching to Sprint.

While I never thought I’d say this, Sprint may finally have found its comeback vehicle. Hitching a ride on the most wildly successful mobile platform ever created is the right move at any price. Even if that price is almost 2.5x your market capitalization? Time will tell…

Paul Grim is a founder and general partner with SunBridge Partners. He tweets here and writes a blog called Grim Times.

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