Sprint's Unlimited iPhone 5 Upside

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It's all coming together for Sprint Nextel (NYSE: S  ) .

The telco giant's latest ads aim right for the jugular. Pitting itself against the three other major wireless carriers, Sprint points out how AT&T (NYSE: T  ) and Verizon (NYSE: VZ  ) slap users with extra charges if they go over 2 gigabytes a month of data. T-Mobile doesn't break out the cash register, but it reserves the right to slow down the connectivity speeds once a user passes 2 gigabytes of data noshing.

Sprint, on the other hand, is promoting its truly unlimited data plan.

Now let's add something new to the recipe: Apple's (Nasdaq: AAPL  ) iPhone 5.

It's been widely reported that Sprint will become the third domestic carrier to offer Apple's iPhone when it hits the market in a few weeks. Is Sprint setting itself up as the only iPhone provider to offer unlimited data plans to new customers?

Putting those two nuggets together, sources are telling Bloomberg this morning that Sprint will be offering the iPhone 5 with unlimited data come mid-October, setting itself apart from AT&T and Verizon Wireless.

On the surface, it's a brilliant approach. Even if AT&T and Verizon proclaim that 2 gigabytes of data is more than enough for most of its smartphone users, no one wants to be on the clock. One would also assume that as connectivity speeds improve, wireless customers will slurp down more data. All things being equal -- though they never are -- who wouldn't go with Sprint and its attractively priced plans when pitted against the country's two largest carriers?

This will be a major differentiator for Sprint, especially for new wireless customers (since AT&T and Verizon continue to offer unlimited data to existing subscribers).

It can also backfire on Sprint. What if only the biggest data hogs show up at Sprint's trough? We saw what happened to AT&T's network once it was overcome by surf-happy iPhone owners.

Will Sprint be able to subsidize the iPhone at the same rate as Verizon and AT&T? The carrier charges relatively less than its more popular competitors, so there's less money coming in during a two-year contract to help offset the difference between what Apple collects on every new iPhone sold and what Sprint is selling them for. Sprint hasn't turned a quarterly profit in years, so it's not as if it has a lot of wiggle room with its margins.

This is still the right approach for Sprint. It needs to stand out, and beginning to roll out ads positioning itself as the last lemonade stand offering unlimited data should build a healthy crescendo of demand when the Sprint iPhone becomes official next month.

Consumers should also root for Sprint here, because the greater the success it achieves here, the more likely that AT&T and Verizon reconsider their tiered data pricing approach.

October, don't be late.

If you want to stay on top of the iPhone 5 battle between its three likely carriers, add Verizon Communications, AT&T, and Sprint Nextel to My Watchlist.

The Motley Fool owns shares of Apple. Motley Fool newsletter services have recommended buying shares of Apple and AT&T, as well as creating a bull call spread position in Apple. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

Longtime Fool contributor Rick Munarriz calls them as he sees them. He does not own shares in any of the stocks in this story. Rick is also part of the Rule Breakers newsletter research team, seeking out tomorrow's ultimate growth stocks a day early.

Read/Post Comments (4) | Recommend This Article (8)

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  • Report this Comment On September 09, 2011, at 5:16 PM, Realexpectations wrote:

    Go Sprint Go!

    Run as fast as you can!!

    Those guys are fat, and yet you still fall behind!

    Boost Mobile is awesome

    keep up the good work!

  • Report this Comment On September 09, 2011, at 6:05 PM, chatura wrote:

    Right now this will be a disaster. First things first. Sprint network is no verizon or AT&T. It can survive very well without the additional bandwidth sucked up iphone. But when the game changer iphone comes into picture sprint has to run for cover with its network crumbling under overload by the iphone users. Don't think it is a smart strategy in the long term although in the short term it might attract more customers and set it up for a quick sale

  • Report this Comment On September 10, 2011, at 1:24 PM, lowmaple wrote:

    If sprint gets all those iphone users even if they clog the line perhaps they then could have the cash to upgrade.

  • Report this Comment On September 12, 2011, at 12:32 PM, Eerkes wrote:

    is this a debate about how an investment in sprint dies? if they dont attract iphone users they continue to slowly bleed out. if they do attract iphone users, they most likely will be data hogs that will cost more than they bring in. i like the t & vz story long-term as they know how to make money. best buy out of this is vod

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