Of all the major wireless carriers, Sprint (S) - Get Report has the most aggressive iPhone promotions so far, offering a free iPhone 8 (or a $525 credit for the iPhone 8 Plus) with a trade-in of select, recently-releasedsmartphones. And customers who participate in the carrier's iPhone Forever plan will be eligible for an upgrade next year.
While Sprint may look excessively generous for this cycle of the coveted Apple (AAPL) - Get Report devices, CEO Marcelo Claure has a long-term plan to squeeze every dollar out of each iPhone. The Sprint boss -- who founded and ran international wireless phone distributor Brightstar before taking his current role -- has a deep understanding of the value of mobile devices.
Shares of Sprint gained 0.8% to $7.88 on Tuesday. The stock has surged and fallen in recent sessions in synch with speculation about a merger with T-Mobile (TMUS) - Get Report , which was up 0.2% to $63.03 on Tuesday.
Claure explained a new twist to the business at a mid-September investor conference in New York. Customers who lease devices under Sprint's iPhone Forever plan can upgrade their iPhone every year. To handle the flow of trade-ins, the carrier recently remade its Virgin Mobile prepaid service unit as an iPhone-only carrier. Sprint will send traded-in iPhones to Apple to be "remanufactured," Claure said at the conference, and then Virgin Mobile will sell the iPhones with a one-year warranty.
"We're going to have the steady supply of returns that we get from a Sprint leasing business, and those are going to be placed into Virgin," Claure said, adding that the refurbished sales would start in October. In light of Claure's explanation, Virgin Mobile's puzzling June announcement that it would only sell iPhones makes more sense.
Other wireless carriers carriers have sold refurbished phones, keep phones to loan to customers during repairs or as replacements for insured devices that are damaged. Sprint's makeover of Virgin Mobile stands out.
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"[T]he idea of an iPhone-only prepaid carrier seems unique and the other major carriers do not appear to provide iPhone refurbs on their prepaid services," said Gartner analyst Bill Menezes in an email. "Having an iPhone-only prepaid option seems to make sense, although only if [Sprint] already has determined that Virgin's customer base historically has been willing to pay more for phones (even a refurbished iPhone 7 isn't cheap, although if Sprint is selling SEs and 6's those probably hit the price threshold a prepaid customer wants to see)."
Sprint's CEO has a background in moving cell phones. In 1997, Claure founded Brightstar,a Miami-based company that distributes mobile devices and accessories to mobile carriers and retail shops in 100 countries. Brightstar's promotional materials say that it "participates in every stage of a device's lifecycle, from when it's manufactured to the moment it's time to trade it in and re-market it." The company processes more than 100 million devices a year.
Japanese telecom and tech holding company Softbank, which Sprint Chairman Masayoshi Son controls, bought a 57% stake in Brightstar for $1.26 billion in 2013. Claure's company then became the distributor for many of Softbank's global telecom businesses.
Sprint named Claure its CEO in August 2014, shortly after Son gave up on his first attempted merger with T-Mobile. While the Softbank founder had ambitions to combine Sprint and T-Mobile into a super-charged rival to AT&T (T) - Get Report and Verizon (VZ) - Get Report , Obama administration regulators made clear that they would not approve a deal. In a statement when he was hired, Claure openly said that M&A would be on hold. "While consolidating makes sense in the long-term, for now, we will focus on growing and repositioning Sprint," he said.
Sprint's aggressive iPhone deals are part of that repositioning that Claure mentioned back in 2014. As Sprint prepares to launch the sale of refurbished iPhones through Virgin Mobile, Claure may also address industry consolidation if a T-Mobile merger finally materializes.