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Apple Could Destroy Sprint With Just a 4G iPhone
March 20, 2012 12:08 PM
HOLD THE PHONE
Once rumors began to flare that
) third-generation iPad was going to sport 4G networking support, it was
that Cupertino's next iPhone model will also be a true 4G device -- and not just by
. Given the many LTE entries from
) -- with even LTE
) devices underway -- Apple was long overdue for one of its own. The new iPad supports
) 4G networks, so it stands to reason that the upcoming iPhone would do the same.
But what about
)? It offers up the iPhone 4S with unlimited data to new customers, but where's the iPad support? Well, its LTE network hasn't yet rolled out, leaving LTE-enabled iPads with subpar speeds. And Bernstein Research analyst Craig Moffett believes Sprint's scramble to deliver a 4G network could be its downfall once Apple launches its forthcoming iPhone 5.
All Things D
that, according to Moffett, an LTE iPhone could potentially destroy Sprint and bring on a "stupendous debt burden."
"We believe an LTE iPhone will likely be badly disadvantaged on Sprint's network, potentially impairing sales...at a time when Sprint is subject to a punishing take-or-pay deal with Apple," Moffett said in a note to clients. "The problem is 4G. Sprint doesn't have enough free-and-clear spectrum on which to launch a competitive LTE network, and it doesn't have the money to clear spectrum that's already in use."
It's a fascinating conundrum. Sprint desperately needs the wildly popular iPhone to survive against its bigger competitors, and yet, a successful deal with Apple could drive network traffic far beyond what Sprint can handle.
Moffett posited two scenarios that could happen this year. One: "The company successfully navigates its complicated Network Vision upgrade, stabilizes Clearwire's financial position, and delivers a compelling 4G product." And two: "Some combination of Sprint's gargantuan take-or-pay contract with Apple, a hobbled 4G offering, and a stupendous debt burden bring the company to its knees."
Believing the risk is too great, Moffett gave an "underperform" rating on Sprint's shares. However, he was careful to state that he is "not predicting a Sprint bankruptcy" and is "merely acknowledging that it is a very legitimate risk." Adding, "And notwithstanding a recent rally in Sprint shares, we believe that risk is rising."
Let's hope that Sprint can pull this off. As the major mobile carriers grow larger, greedier, and more conservative with the rights they grant their subscribers, the last thing we need is less competition in the industry.
Apple Needs to 'Pull an iPad' on Its iPhone
AT&T Falsely 'Upgrades' iPhone 4S to 4G
For an investment angle on these and many more tech stocks, take a
FREE trial to the TechStrat Report
by Sean Udall.
No positions in stocks mentioned.
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