NEW YORK (Trefis) -- With the iPhone 5 is likely to be launched this fall, the carriers are getting ready to market their services.One key factor that we believe will differentiate this generation of the iPhone from the previous ones, apart from a possible change in form-factor and better processor, is the availability of an LTE-compatible chipset. While carriers such as Verizon ( VZ) and AT&T ( T) are getting ready to tout their respective LTE networks, late-entrant Sprint ( S) just started to roll out its first LTE markets this week. Its marketing strategy will most likely remain unchanged from the last year when it aggressively promoted its unlimited plans. But is it going to be a big deterrent for Sprint to move more iPhones out of the door in order to meet its huge commitment to Apple ( AAPL)? We don't think so and here's why. (See our complete analysis of Sprint
The effectiveness of this strategy is evidenced by the two consecutive quarters of strong postpaid net adds that the carrier has been able to post to its core Sprint network, thanks to its unlimited plans. Sprint added net 263,000 subscribers to the Sprint platform last quarter, below the previous quarter's 539,000 but a tad more than the net adds posted a year ago. This came even as an increasingly saturated wireless market caused Verizon and AT&T to add fewer postpaid subscribers this quarter. Further, it was also the least impacted by the seasonal slowdown in the U.S. iPhone sales last quarter as it activated about 1.5 million iPhones during the quarter, about 16% lower than the previous quarter. AT&T and Verizon meanwhile saw sequential declines of 43% and 24%, respectively, in iPhone sales. (See
Sprint's iPhone Bet Is Starting To Pay Off, $3.75 Fair Value.) The iPhone has also brought in many new subscribers to Sprint. The iPhone's debut quarter at Sprint saw 40% of its iPhone sales go to new subscribers. In the next quarter, the iPhone accounted for 660,000 new subscribers to Sprint, which is an improved 44% of its total sales. Sprint's postpaid ARPU also jumped $3.70 as a result, or 6.6% versus the same period last year, as users of the iPhone are heavy data users as well. LTE Disadvantage Is Only Near-Term The lack of LTE network with good coverage may, however, deter a few customers from choosing Sprint if the smartphone comes with minimal upgrades other than LTE. Sprint will launch its first LTE markets on July 15 while Verizon's and AT&T's LTE networks already cover almost 200 million and 75 million Americans, respectively. However, LTE adoption rates have been slow so far; so Sprint may not miss out by a lot as long as it continues to deliver on its aggressive roll-out plans. As of last quarter, Verizon converted only 9% of its subscriber base to LTE despite having such a wide lead in terms of LTE coverage over others. We do not also foresee the iPhone 5 launch causing mass defections from Sprint as that would entail forking over huge penalty fees for breaking the two-year contract. Sprint started offering its first iPhone only late last year when the iPhone 4S was released.
On the other hand, we expect many to see the long-term benefits of choosing a carrier that has promised to keep its plans unlimited for LTE as well. Sprint expects to have most of its LTE network ready by the end of 2013. As LTE adoption rates rise and the iPhone brings in the highly lucrative postpaid subscribers, we expect Sprint to see its data ARPU levels rise in concert. Sprint's unlimited LTE plans will meanwhile help it maintain its niche and differentiate from rivals at a time when wireless subscriber growth has nearly saturated. We have a
price estimate of $3.75 for Sprint, about 15% ahead of the current market price. Click here to find out how a company's products has an impact on its stock price at Trefis. Like our charts? Embed them in your own posts using the Trefis Wordpress Plugin. This commentary comes from an independent investor or market observer as part of TheStreet guest contributor program. The views expressed are those of the author and do not necessarily represent the views of TheStreet or its management.