3 reasons why the iPhone won't help Sprint very much

Sprint still must confront AT&T-T-Mobile deal, need to convert to LTE, and win new customers

It might sound like a major win for Sprint to begin selling the iPhone for the first time in mid-October, but veteran industry analysts say it won't help Sprint all that much.

Sprint will get the iPhone 5 in mid-October, at the same time that its bigger competitors, AT&T and Verizon Wireless, get the iPhone 5, according to unnamed sources cited in the Wall Street Journal. Both AT&T and Verizon already sell versions of the iPhone.

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Sprint won't comment officially on selling the iPhone and Apple won't comment on when the next-generation iPhone will launch, or with which carriers. Even so, a next-generation iPhone is widely expected to surface in coming weeks, one with an improved operating system and a better camera.

While some experts regard Sprint's ability to finally offer an iPhone as a major win for the third-largest U.S. carrier, other disagree. Here are three reasons why selling the iPhone won't help Sprint all that much:

1. Sprint unlikely to win many new customers

"The iPhone is a great device and it will let Sprint hang on to some customers who would otherwise leave [the carrier], but I don't think many customers will move to Sprint because of the iPhone," said Jeff Kagan, an independent technology analyst, in an email. "While definitely good news, I don't see this [sale of the iPhone] shaking the timbers at Sprint."

Added Jack Gold, an analyst for J. Gold Associates: "Unless Sprint has a major price advantage, including really low-cost data plans or some other sales gimmick like free phones, Sprint might not gain all that [many new customers] since many people consider Sprint to be the least desirable carrier from a coverage perspective."

Gold said that while some Sprint customers "would like to get their hands on the iPhone," thus helping sales, the phone is unlikely to make as much of an improvement for Sprint as it did when Verizon got the iPhone 4 in February. (In 2007, AT&T got the original iPhone, exclusively, which helped improve AT&T sales.)

"The iPhone is now becoming a commodity, since it is soon to be available on all carriers," Gold said via email. "So customers will not only choose a phone, in this case the iPhone, but also the carrier they want to work with."

At best, added Gartner analyst Ken Dulaney via email, Sprint's iPhone "probably keeps some customers from bleeding to other networks."

On the contrary, the conventional wisdom shared by a few Wall Street analysts is that Sprint will see customers upgrade to the iPhone, which could draw them inside Sprint stores to buy iPhone accessories, which command high profit margins.

2. Deal could boost AT&T acquisition of T-Mobile

Sprint will look stronger to federal regulators with sales of the iPhone, which will have some effect in improving AT&T's chances of winning regulatory approval of its $39 billion purchase of T-Mobile USA.

This reason depends entirely on how regulators view competition and the importance of iPhone sales to a carrier. The Federal Communications Commission has repeatedly expressed concerns about exclusive deals that carriers strike with manufacturers to sell devices, as AT&T had with Apple for years with the iPhone. By stretching the number of carriers offering the iPhone to include Sprint, some legal and regulatory experts believe a combined AT&T-T-Mobile -- massive as that would be -- would be less of a threat to Sprint.

Sprint has aggressively fought the proposed AT&T-T-Mobile merger, and would likely oppose any notion that helps that merger, short of not selling the iPhone, analysts noted.

"Sprint has bigger worries with the pending AT&T-T-Mobile merger [than getting an iPhone]," Kagan said. "This device, while good news, won't solve their growing and more serious problems. Because of the proposed merger, Sprint faces a significant uphill battle. They will be a much smaller competitor compared to number one and two."

As of June, Sprint counted about 52 million subscribers, while Verizon had 106 million and AT&T had nearly 99 million. T-Mobile recently had 34 million.

"The combination of AT&T and T-Mobile will be a huge issue for Sprint to overcome," Gold said.

3. Little network gain seen

Depending on which networks the iPhone 5 supports, Sprint is likely to see little network advantage over AT&T and Verizon.

This reason depends on postulations about what networks will or won't be supported by the iPhone 5. In the spring, some rumors surfaced that Sprint would get an iPhone 4S, a variant that could support Sprint's expanding 4G WiMax network or at least Sprint's 3G CDMA network. This week, one unnamed source in the Wall Street Journal said Sprint would get the iPhone 4 as well as the iPhone 5 in mid-October, but there was no mention of whether Sprint's iPhone 4 would be a special iPhone 4S for WiMax 4G or just an iPhone 4 that runs over 3G CDMA, similar to Verizon's iPhone 4.

If there's no speed boost from WiMax for Sprint's iPhone 4, then it doesn't seem like much of an improvement over competitors, analysts noted.

As for the iPhone 5, most analysts don't believe it will support 4G speeds in either Wimax or LTE. (LTE is now deployed by Verizon in 142 cities and by AT&T in a few cities). Gold and Dulaney said its unlikely Apple will build a WiMax-ready iPhone model, and further noted that Sprint doesn't have an LTE network at all, although it announced in July a 15-year deal with LightSquared that gives Sprint the option to buy LTE capacity from LightSquared after Sprint builds wholesale LTE network services for the LTE technology provider.

Given Sprint's network status and the probability the iPhone 5 will still be a 3G phone (possibly able to run over both AT&T's GSM and Verizon's and Sprint's CDMA), Gold said Sprint won't be able to sell itself as a better network alternative over AT&T or Verizon. "I don't think Sprint's carrying the iPhone is a groundbreaking [network] capability for Sprint," Gold concluded.

Dulaney added: "The real problem remains that Sprint's 4G WiMax is a non-mainstream technology and that Apple will not support that, I would be pretty certain. So if you want an iPhone and you want high-speed networks, you will have to go to other networks."

Dulaney said he realized iPhone 5 is not likely to run on LTE, but added that LTE could come to an iPhone 6 or later. An LTE-ready iPhone "is not that far away, in my opinion, and when that happens, Sprint will remain behind. Sprint must convert to LTE and away from WiMax. They will have to do that to ever have a chance of vying for mainstream network leadership in the U.S."

In summary, veteran analysts believe the Sprint iPhone 5 will be great for existing Sprint customers as an upgrade choice, but it is not likely to draw in many customers new to Sprint, which the carrier badly needs. Sprint might wrangle new customers with data pricing deals or giveaways, but it's not likely that its wireless networks will be a lure over those of Verizon or AT&T.

And looming over all these worries is how Sprint fares with regulators who are weighing AT&T's planned takeover of T-Mobile. Selling the iPhone could make Sprint appear stronger from a competitive standpoint, giving regulators more confidence that the merger would not be such a serious blow to Sprint.

With or without the iPhone, the real ongoing concern for Sprint CEO Dan Hesse and his managers is the proposed AT&T-T-Mobile merger and how a distant-third place carrier will remain viable in the U.S. market.

Matt Hamblen covers mobile and wireless, smartphones and other handhelds, and wireless networking for Computerworld. Follow Matt on Twitter at @matthamblen or subscribe to Matt's RSS feed. His email address is mhamblen@computerworld.com.

This story, "3 reasons why the iPhone won't help Sprint very much" was originally published by Computerworld.