The Privilege Of Selling An iPhone Is Already Paying Off For T-Mobile

By Jimmie Geddes email: j.geddes@mobilenapps.com | Jan 11, 2013 10:14 AM EST

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When Apple launched the original iPhone in 2007, it had announced an exclusive relationship with Cingular, allowing it to be the only carrier in the U.S. to sell what would be the device that changed the smartphone landscape as we know it. AT&T acquired Cingular before Apple launched the iPhone in June 2007 and Apple had a new partner at launch - AT&T. It was an exclusive like no other. The device sold for $499 and $599 with a new 2-year contract. While America fell in love with the iPhone it became apparent that Apple really did "reinvent the phone" as Steve Jobs preached it would. At the time he probably never could have seen how much of an impact a single device can have on the world.

One term of Apple and AT&T's 4-year exclusivity deal leaked and revealed Apple had secured an unheard of deal then and now. The deal got AT&T to agree to pay Apple a percentage of the monthly charges it was charging iPhone customers on its network. This deal proved to be a huge win for AT&T too as it saw record new customers buy and activate an iPhone while leaving their current carriers. Verizon knew it had made a mistake of not agreeing to Apple's terms when it was being considered as the exclusive launch partner prior to Cingular's deal.

In January 2011, Verizon officially announced that it reached an agreement with Apple and would begin offering a CDMA version of the iPhone 4 on its network. Many Verizon customers had already switched to AT&T to gain the "iPhone experience" and Verizon wanted to curb the exodus. Sprint also soon began to feel the iPhone pressure and secured a deal with Apple that allowed the carrier to begin selling the iPhone 4 and iPhone 4S on its network in 2011. In return, Sprint would pay Apple $15 billion during the 4 year agreement. Sprint CEO, Dan Hesse said :

"I think the No. 1 thing was getting the call from Apple that they were interested in at least having the opportunity," Hesse said. Of course, the company and its board had to take a hard look at the economics. Selling the iPhone is good for the long term, Hesse said, noting that customers are more valuable in the long term. But, in the short term, it is costly, as the company spends more in subsidies to attract those iPhone buyers.

"We committed to $15.5 billion over four years in purchases," Hesse said. "That's a large commitment." He said Sprint looked at Apple and its popularity, and "we saw no reason to bet against Apple."

T-Mobile announced that it had secured a deal with Apple in December 2012, which will allow T-Mobile to sell Apple products this year. The iPhone would now be offered on all four major carriers in the US. The iPhone is proving to be very popular for T-Mobile before it even launches its own variant of the smartphone. T-Mobile's CEO, John Legere, announced that the carrier is already activating around 100,000 iPhones per month. These iPhones are usually unlocked AT&T and GSM iPhones allowing them to run on T-Mobile's network. If this statement is any gauge of how much of a success T-Mobile's deal with Apple will be, things are going to get very interesting in 2013.