Market Overview

$100 Million in Unsold iPhones Plague This Carrier

When Leap Wireless' (NASDAQ: LEAP) prepaid network decided to offer the iPhone in 2012, the company expected big sales.

This was an easy expectation to make. After all, Sprint (NYSE: S) has been boasting about its high iPhone sales for several quarters.

AT&T (NYSE: T) sold 8.6 million iPhones last quarter alone, setting a new record. Verizon (NYSE: VZ) also sold several million units.

The same cannot be said for the prepaid carriers. While Virgin Mobile has not announced its iPhone sales in America, the carrier reduced the price of the 4S to $450 last fall. When the device was first released, it sold for an astonishingly high amount: $650. The carrier also dropped the standard iPhone 4 to $350 from $550.

On Black Friday, Target (NYSE: TGT) offered a $100 gift card to those who purchased the iPhone 4S for Virgin Mobile. Meanwhile, Best Buy (NYSE: BBY) has pulled the item from its website without providing any indication as to its availability in store.

Cricket (Leap's prepaid company) currently charges $499 for the iPhone 4S and $399 for the iPhone 4. The carrier has not announced any price cuts, but if this new report is true, they could come in the near future.

According to Business Insider, Cricket is currently sitting on millions of dollars in unsold iPhones. BI cited a report from BTIG Research, which found that the carrier's stagnant iPhone stock may add up to $100 million.

To put that into perspective, Cricket could be stuck with 200,000 iPhone 4S units ($100 million divided by $500 equals 200,000 units) or 250,000 iPhone 4 units ($100 million divided by $400 equals 250,000), or some combination of the two.

Compared to the millions of units that the primary carriers sell each quarter, this may not sound like that many units. Apple can afford to take the miniscule loss. The same may not be true for Leap, which is trading down nearly three percent today.

As of this writing, Sprint has an intraday market cap of $17.6 billion. Verizon stands at $133 billion, while AT&T has a market cap of $198 billion.

Leap, one of the smallest carriers in America, has a market cap of just $427 million. Thus, the firm cannot afford to sit on $100 million in unsold iPhones.

Cricket could discount the items to reduce inventory, but it might still have trouble selling them. Unlike Virgin Mobile, Cricket's network is in a very limited number of markets. Consumers are forced to enter their zip code on the company's website before they can read about the iPhone.

If it is not available in a particular area, Cricket simply tells the customer that he or she is out of luck. Consequently, only a select number of individuals are exposed to Cricket's iPhone offers.

Follow me @LouisBedigianBZ

Posted-In: AT&T Cricket iPhone 4SAnalyst Color News Rumors Analyst Ratings Tech Best of Benzinga

 

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