By JOANN S. LUBLIN And SPENCER E. ANTE
Sprint Nextel Corp. will begin selling the new version of the Apple iPhone in mid-October, people familiar with the matter said, filling a huge hole in the No. 3 U.S. carrier's lineup and giving Apple Inc. another sales channel for its popular gadget.
The timing, however, indicates Apple's new iPhone, which is expected to be called iPhone 5, will hit the market later than expected and too late to contribute to sales in Apple's fiscal fourth quarter, which ends in September. Most observers had expected the device to arrive next month.
The deal could help prop up the nation's third-largest carrier and give AT&T Inc. more ammunition in its attempt to win regulatory approval for its proposed acquisition of No. 4 U.S. carrier T-Mobile USA Inc.
Verizon Wireless and AT&T, the two largest wireless carriers, measured by subscribers, will begin selling the phone in mid-October as well, according to two people familiar with the matter.
Sprint had more than 52 million subscribers at the end of the second quarter, compared with 106 million for Verizon and nearly 99 million for AT&T.
Sprint will begin selling the iPhone 5 in mid-October, closing a huge hole in the No. 3 U.S. carrier's lineup and giving Apple another channel for selling its popular phone. Spencer Ante has details on The News Hub.
Landing the iPhone is a big win for Sprint, whose results have suffered without being able to sell the trend-setting device. AT&T has relied on versions of the Apple device to drive sales since 2007. This February, Verizon Wireless began selling the iPhone 4. Verizon Wireless is a joint venture of Verizon Communications Inc. and Vodafone Group PLC.
In the second quarter, Sprint blamed a decline in its contract subscribers on more pronounced "competitive headwinds," most prominently, "the first full quarter both major competitors offered the iPhone."
Sprint will also carry the iPhone 4, starting at the same time, one person familiar with the situation said.
Richard Doherty, director of the research firm Envisioneering Group, said that the addition of the iPhone would help Sprint retain many of its customers itching to upgrade. The iPhone will also increase foot traffic in Sprint stores, which should help the company to sell high-margin iPhone accessories. "Sprint needs it," said Mr. Doherty. "There are a lot of families that will embrace the iPhone."
That said, the deal could also hurt Sprint by helping AT&T improve its chances of winning approval from regulators for its $39 billion purchase of T-Mobile USA, said Marc Ostrau, a partner and co-chair of the antitrust and unfair competition group at law firm Fenwick & West.
"It not only is likely to give Sprint a boost but also puts more focus on the increasing importance of device suppliers relative to carriers," said Mr. Ostrau.
Herbert Hovenkamp, a professor of law at the University of Iowa, said a Sprint iPhone would probably help AT&T's efforts, but he said the impact depends on how much regulators determine the deal curbs AT&T's ability to raise prices without losing too many sales.
"The question is how much more competition do you get when you have two rivals rather than one," said Mr. Hovenkamp.
The cellphone business is increasingly driven by hot smartphones, which are growing more sophisticated and expensive. Apple commanded an average of more than $650 apiece for its iPhones last quarter. Carriers subsidize the difference between that cost and the phone's $199 or $299 retail price, hoping to make up the difference with the data plans they sell over the course of two-year contracts customers must sign to get the subsidy.
Apple created additional leverage for itself by signing exclusive deals when it first launched the iPhone in 2007. In recent years, the company has changed strategy, inking deals with multiple carriers in countries around the world.
The new iPhone is expected to be similar to the current iPhone 4, but thinner and lighter with an improved digital camera and a new more sophisticated operating system.
Apple said in June that a new version of its mobile operating system would be available this fall, leading many analysts to conclude that an upgraded iPhone would be introduced at the same time.
On a July earnings conference call, Apple Chief Financial Officer Peter Oppenheimer said the company's September quarter would be affected by "a future product transition that we are not going to talk about today," increasing anticipation.
While Apple unveiled the iPhone 4 at its June developers' conference last year, its successor wasn't ready in time for this year, according to a person briefed on Apple's product plans. The company then aimed to launch a new iPhone by the end of September, though two people familiar with the situation previously told The Wall Street Journal that the phone could be delayed again if its contract manufacturer couldn't improve its production yield rate.
Sprint, fighting to turn itself around after its disastrous merger with Nextel last decade, has managed to stem subscriber defections and improve customer service. But it has disappointed investors by failing to add new subscribers more quickly, in part because it competes with rivals that carry Apple's fast-selling phone.
Verizon Wireless, which cracked AT&T's exclusive U.S. hold on the iPhone this year, has sold 4.5 million of the Apple devices in the first half of 2011.
AT&T, which is also able to sell a cheaper prior version of the iPhone, has sold 7.2 million this year.
—Yukari Iwatani Kane contributed to this article.
Write to Joann S. Lublin at firstname.lastname@example.org