Sprint's Unlimited iPhone 5 Upside

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It's all coming together for Sprint Nextel (NYS: 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 (NYS: T) and Verizon (NYS: 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 (NAS: 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, addVerizon Communications,AT&T, andSprint Nextelto My Watchlist.

At the time this article was published 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.

Copyright © 1995 - 2011 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.

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