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Apple Could Destroy Sprint With Just a 4G iPhone

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Once rumors began to flare that Apple's (AAPL) third-generation iPad was going to sport 4G networking support, it was pretty clear that Cupertino's next iPhone model will also be a true 4G device -- and not just by duplicitous standards. Given the many LTE entries from Android (GOOG) -- with even LTE BlackBerry (RIMM) and Windows Phone (MSFT) devices underway -- Apple was long overdue for one of its own. The new iPad supports AT&T (T) and Verizon's (VZ) 4G networks, so it stands to reason that the upcoming iPhone would do the same.

But what about Sprint (S)? 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 reports 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 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.
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POSITION:  No positions in stocks mentioned.