By Thomas Gryta and Greg Bensinger
Sprint Nextel Corp. (S) is set to become the second U.S. mobile phone service to offer the Apple Inc. (AAPL) iPhone without a wireless contract.
The Overland Park, Kan., carrier will announce this week it will offer the popular smartphone on its Virgin Mobile pay-as-you-go brand starting as soon as July 1, according to people familiar with the company's plans. Sprint follows Leap Wireless International Inc. (LEAP) in selling the device with prepaid service.
By offering the iPhone, Sprint may help satisfy its commitment to Apple to buy $15.5 billion of the phones over four years, an aggressive bet as more carriers are getting access to the once-exclusive device. Sprint's prepaid service, which also includes the Boost Mobile brand, has been its lone area of growth as contract customers have fled.
Sprint added 489,000 prepaying customers in the first quarter, though it lost 192,000 contract customers, which are considered more profitable. It began offering the iPhone on its Sprint brand in October, and has sold 3.3 million of the device over the past two quarters.
Pricing for the Virgin Mobile iPhone couldn't be learned, and it wasn't clear whether Boost would ultimately carry the device.
An Apple spokeswoman declined to comment. The availability of the prepaid iPhone allows Sprint to sell the device to a new demographic. Aside from having no contract, there are no also credit checks for customers.
The addition of the iPhone to Virgin Mobile also leaves Deutsche Telekom AG's (DTE) T-Mobile USA at a greater disadvantage. It is the last of the largest carriers without the device, which Chief Executive Philipp Humm has said is a major reason it lost 1.7 million contract customers last year.
Notably, the prepaid iPhone from Virgin would be more widely available than Leap's Cricket brand because Cricket is only in smaller markets. Although Cricket users can use their iPhone anywhere, it can only be purchased if they live within its network that covers about 60 million people, or 20% of the U.S. population.
Sprint's network, used by Virgin, claims to cover about 278 million people or almost the entire country.
Leap will begin selling the phone on June 22 and charge $499.99 for a 16-gigabyte iPhone 4S and $399.99 for the older 8-gigabyte iPhone 4. Those prices are about $300 more than those sold by the major carriers, but $150 less than what Apple charges for an unlocked 16-gigabyte iPhone 4S.
Sprint already offers various models of the iPhone at the same prices as the other major carriers when customers sign a two-year contract. That includes an 8-gigabyte iPhone 4 at $99.99 and a 16-gigabyte iPhone 4S for $199.99.
In order to carry the phone, Leap struck a three-year deal with Apple under which it agreed to spend $900 million in volume purchases.
Virgin Mobile USA has prepaid plans that begin at $35 a month and offer unlimited data, although speeds will be throttled after the user consumes 2.5 gigabytes a month. It is unclear if the iPhone will be allowed to work on the current plans.
In comparison, Leap is charging $55 for unlimited talk, text and data, which a similar limit on full-speed data, while plans with other wireless carriers are frequently $100 or more, and users are locked into two-year contracts.
Sprint says its Virgin brand is directed toward "subscribers who are device and data-oriented." Sprint acquired Virgin Mobile USA in 2009 for about $480 million.
Write to Thomas Gryta at firstname.lastname@example.org