After weeks of speculation and online searching the world finally knows all about the new iPhone 5 4S. We know it has an A5 chip, providing an experience that will be seven times faster than the current iPhone 4. We know it has dual GSM & CDMA radios to enable global roaming. We know that the 8 megapixel camera is way better than preceding iPhone cameras, with the ability to shoot video in 1080p and better still images in low light. We know that the battery life has improved. And we know – thanks to this report at the Wall Street Journal – that Sprint is spending a boatload of money to achieve iPhone parity with AT&T and Verizon.
What we don’t know yet is how this will play out for Sprint. Despite long having one of the highest smartphone penetration rates in the industry (earlier this year CEO Dan Hesse said that half of its CDMA base were smartphone users), it’s no secret that Sprints’ biggest competitive disadvantage was AT&T and VZW’s stranglehold on the worlds’ most popular phone. Now after years of playing defense with very-good-but-not-iPhone substitutes (like Motorola Photon and Samsung Galaxy S), Sprint gets to play offense. What might this look like?
First, we suspect a lot of Sprint’s existing 33 million customers will upgrade to the iPhone by the end of the year. Compete regularly surveys phone owners and shoppers in its Smartphone Intelligence survey, and looking back at the last four iterations of this survey, we can see that Sprint has the highest percentage of cell-phone owners who are waiting for their provider “to offer a specific” smartphone” before moving up to a smartphone. (And the vast majority of these respondents indicated their preference for the iPhone). Combining the data from this survey with Dan Hesse’s statement of Sprints’ installed smartphone base, we can do a little back-of-the-envelope math: half of Sprint’s 32,897,000 postpaid subscribers equals approximately 16 million cellphone subscribers; multiply this number times 12.5% yields some two million existing subscribers who have been sitting on the sideline waiting for today to upgrade from their current feature phones.
Q: Why is it that you do not own a smartphone (a phone with advanced PC/email/Internet functionality)?
Percentage answering “I am waiting for my wireless service provider to offer a specific smartphone”
Source: Smartphone Intelligence Q3 2010, Q4 2010, Q1 2011 and Q2 2011
Second, and even more importantly, we believe that for the first time in a long time, customers will actually switch to Sprint because of this device. For evidence, consider what happened when Verizon Wireless first offered the iPhone in February 2011, when VZW’s online prospect orders increased 70% over the monthly average for the preceding twelve months. (By March of 2011, online orders had returned to pre-iPhone levels.) And this was for a device that was identical to the one offered by AT&T for nearly eight months. Because this is the newest iPhone with all the features mentioned above, and because of Sprint’s continued support for unlimited data plans (in contrast to AT&Ts and VZW’s move to tiered data plans), we believe Sprint will experience a similar spike in prospect order activity following the iPhone 4S’ launch on October 14.
One final thought. Although the title of today’s announcement was “Let’s Talk iPhone”, CEO Tim Cook used the first half of his time to talk about a lot of other products in the Apple portfolio, including the iPad tablet, the Macbook computer and of course the device that started it all, the original iPod, which was released 10 years ago this month. Please join us this Thursday for our webinar, where we look back on a decade of Apple product and marketing innovations and speculate – just a little bit – on what the next decade for Apple might look like. See you Thursday!