Sprint Nextel was so desperate to get on the iPhone bandwagon that it signed a Faustian style pact with Steve Jobs that resulted in it giving a lot of cash to subsidise the pricey product.
As a result, Bernstein analyst Craig Moffett has said the company will underperform and the debt-laden company faces tough competition and steep costs due to factors such as its iPhone deal with Apple.
He told Reuters that things will get even worse for Sprint as it faces “new and larger risks” if Apple launches a high-speed iPhone later this year based on a technology that Sprint’s bigger rivals will have installed more widely.
Moffett said he was not predicting a Sprint bankruptcy. It is acknowledging that it is a very legitimate risk which is rising.
The difficult time for Sprint will be 2015, when it has to find $2.6 billion to pay off its debt at the same time another $3 billion in debt comes due for Clearwire which is majority owned by Sprint.
Other analysts do not see Sprint filing for bankruptcy in the next few years but admit it has become a riskier bet since it unveiled big investment plans last October.
Part of its problem is that it pledged $15.5 billion to buy iPhones from Apple in the next few years while at the same time it is embarking on a $7 billion network upgrade. It has already raised billions of dollars in capital markets to help fund these projects.
Some analysts think that there is a good bet that the company could pull off its ambitious plans.
We have warned that deals that Apple did with the big US carriers could cause more harm than good before, but this is the first time that someone has admitted that Jobs’ Mob might end up sending outfits over the edge.