In recent times it seems carrier operating costs have outstripped profit margins accrued through sales of smartphone devices, particularly for those from the big brands like Apple.
According to Sprint, the company suffered a net loss of $438 million in due sales of 1.8 million iPhones, despite an increase in subscriber base by 1.6 million. The net loss even tops the $139 million crunch recorded in Q4 last year. The company attributed high operating costs of selling iPhones and a decline in growth of subscriber base as the key reasons for the massive financial crisis.
The forecast for this year's subscriber growth looks positive, though, with a net increase of 55 million subscribers reported this year. Amongst them about 40 percent are said to be new customers.
However, the major problem seems to be their rivals - Verizon - who have completely outclassed Sprint in terms of overall iPhone sales revenue through superior advertising and improved coverage and reception. Sprint actually finds itself in a quagmire supporting the iPhone, wherein the company's best-seller (carrier) is dragging it down.
Sprint's Chief Executive, Dan Hesse, laments the fact he decided against cutting phone prices further, despite an unusually competitive fourth quarter.
"During the quarter we saw unprecedented discounting on devices," Hesse told analysts on a conference call. He was referring to discounts on the iPhone from rival carriers, according to Reuters.
Hesse also pointed out that Sprint lost customers from the Nextel network, which is supposedly ready to shut down by the middle of 2013. Furthermore, the company hinted its profit margins would remain under pressure in 2012.
However improvements are expected in the second half, as smartphone users spend more on data services.
Unlike the past, carriers have now been bestowed with the additional responsibility of catering to services like tethering and massive data downloads on portable devices, besides always-on connectivity. Add to that the host of comments and criticisms posted on social networking sites, as the carriers strive to provide cutting edge technology with error-free functionality, and there is a definite issue.
Expect more and more carrier customized handsets creeping into the market with special offers and discounts, trying to convince potential buyers as competition heats up in the mobile operator market.
It might even be time for Sprint to change its stance on no price-cuts and come up with some lucrative offers.