Sprint’s Hesse: We’ll Make Money on the iPhone … Eventually

Sprint Nextel CEO Dan Hesse took a $3.25 million pay cut earlier this month, as penance for orchestrating the company’s pricey iPhone deal with Apple. Has outcry over the agreement — which will cost Sprint an estimated $15.5 billion over the next four years — soured him on it?
Not at all.
“We’re very happy with it,” Hesse said of Sprint’s deal with Apple, during the company’s annual shareholders meeting Tuesday. “Carrying the iPhone will be quite profitable.”
But not for a few years, at least.
By its own admission, Sprint won’t profit from the device until 2015. But according to Hesse, who was reelected to Sprint’s board during Tuesday’s proceedings, that initial heavy upfront investment in the iPhone is worthwhile because it will slow subscriber turnover and create a new segment of higher-value subscribers.
“We believe in the long term,” Hesse said. “And over time we will make more money on iPhone customers than we will on other customers.”
And there, it would seem, Hesse does have a point. Sprint sold 1.5 million iPhones in its first quarter, with about 44 percent of them going to new customers. And those sales helped spike Sprint’s average revenue per user 6.9 percent, the largest year-over-year increase ever charted in that metric in the U.S.

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