Apple's Newest Competitor: Sprint?

For better or for worse, Apple (AAPL 0.52%) relies heavily on wireless carriers and their hefty subsidy payments. Carriers have been trying to everything in their power to reduce subsidy expenses in recent years, although consumers still largely call the shots. If the subsidy-intensive iPhone is what they want, then the carriers have little choice but to pay up.

In an effort to promote even more competition in the already highly competitive smartphone market, Sprint Nextel (S) has decided to jump in directly with a new Sprint-branded smartphone.

Sprint Vital. Source: Sprint.

The Sprint Vital is launching on Friday, priced at $100 on contract. The device packs in numerous high-end features at that mid-range price point, and naturally Sprint's goal is to profit off the service plans rather than the device itself. The Vital will run a stock version of Google Android 4.1.2 Jelly Bean, with Sprint conservatively pre-installing its apps. This is far from the widespread trend to overlay excessive software modifications, but Sprint still wants you to use its services.

The new device will sport a 5-inch display and a Qualcomm Snapdragon processor, the MSM8960. That's the same chip that powered numerous flagship Androids from 2012, so Sprint is saving a little bit on costs by not going with Qualcomm's newest silicon.

Of course, Sprint isn't designing or manufacturing this device itself. It's tapping a white-label ODM to make the phone for it, which it then rebrands and sells under its own yellow umbrella. In this case, we're talking about Chinese vendor ZTE (which is now the No. 5 vendor in the world). The choice is unsurprising since the Vital looks very similar to the ZTE Grand S LTE.

This isn't the first time that carriers have jumped directly into first-party smartphones. T-Mobile has been doing it for years, such as with its myTouch devices. HTC also started off as just an ODM, making the world's very first Android phone that was sold under T-Mobile's brand, the T-Mobile G1.

Last quarter, Sprint activated 1.5 million iPhones, representing 30% of the total 5 million smartphones that the carrier sold. That's a lower presence than Apple enjoys on the larger carriers. Having Sprint toss in another price-competitive Android device may make it harder for Apple to grow its installed base there, particularly since the Vital runs stock Android, which is a selling point in itself.

Apple's expected affordable iPhone could move down-market to challenge the Vital and other mid-range devices later this year. Besides, the Mac maker's biggest opportunities nowadays are abroad.