October iPhone 5 a Boon for Apple, Not Sprint

Sprint may finally jump on the bandwagon and join its rivals in offering Apple's products, starting with none other than the iPhone 5 -- but this may not prove to be such a boon to the No.3 U.S. carrier.

Sprint Nextel will start selling Apple's next-generation smartphone, the iPhone 5 ,in mid-October, according to a report in The Wall Street Journal late Tuesday.

The speculation was greeted positively by Wall Street, with Sprint shares initially jumping 10 percent to close the day at $3.59, but investors cooled down as the Wednesday session opened.

Some analysts believe that the deal may help Sprint get more people in the door and subsequently push more units, but the cost of subsidizing the phone to prices acceptable to consumers may hurt the carrier.

Be careful what you wish for, R.W. Baird & Co. analyst William Power told investors today.

Bringing the iPhone to Sprint would fill a gaping competitive hole, he explained, but it would also put pressure on the company's [earnings], given the upfront iPhone subsidy costs.

Wells Fargo's Jennifer Fritzsche agreed.

Given the higher subsidies it should expect, we believe [Sprint's] 2011... guidance [of $200-250 million] will prove to be a reach, she told investors. Second, investors may question the capital spend ahead of Sprint. The possible addition of the iPhone, will require more spending, in our view.

Analysts said that while it would cost Sprint to add the iPhone 5, there would be some positives that could offset the costs in the long term. Estimates hover in the millions of units that the company could look to move in the fourth quarter, if the deal materializes.

If [Sprint] has the ammunition of the iPhone under its belt, it could help it change the recent gross add trend and bring more customers in the door, Fritzsche added. Sprint's portfolio of handsets of late have not been appealing enough to move users away from AT&T and (especially) Verizon, in our view.

While time will tell if Sprint can fully capitalize on getting one of the most anticipated smartphones, there will be one clear winner: Apple.

Sprint is the third largest carrier in the U.S., with 52 million subscribers -- which would make for be a nice expansion for Apple. It already sells on AT&T, the No.2 carrier with 99 million subscribers and the No.1 Verizon, which has 106 million.

Apple stands to add six million units to its 2012 market share, said Piper Jaffray's Gene Munster, based on the fact that Verizon sold 4.6 million iPhones during the first two quarters of its availability.

The result would be iPhone sales growth from 30 percent in calendar 2012 to 37 percent, and would boost the calendar-year earnings per share to $34.59 instead of his estimated $33.72.

Sprint was down seven cents, or 1.95 percent to $3.52 by mid Wednesday trading, while Apple shed 0.1 percent, or 40 cents to trade at $373.13.