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Mobile Leadership Strategies

Sprint, Clearwire Reach Deal for US$2.2 Billion

Daily Insight | Rich Karpinski | December 17, 2012

 

Shortly after it was reported Sprint had offered to buy out the remaining nearly 50 percent of Clearwire, the two companies have come to an agreement. Sprint, the nation’s third-largest mobile network operator, will complete its purchase of Clearwire for $2.2 billion.

 

According to The New York Times, Sprint confirmed the acquisition on Dec. 17. Of course, spectrum was the main motivator of the deal as Sprint now gains access to all of the spectrum held by Clearwire and can use it to bolster its LTE network. The news provider also noted that the infusion of cash Sprint has experienced as a result of selling a majority stake in the company to Japan’s SoftBank gave it the financial strength to make this latest deal. “Today’s transaction marks yet another significant step in Sprint’s improved competitive position and ability to offer customers better products, more choices and better services,” Sprint CEO Dan Hesse said in a statement.

 

Yankee Group Senior Analyst Rich Karpinski comments

 

“This deal seemed inevitable, but it’s also not quite yet done. When SoftBank bought up Sprint, it gave the operator, which seems to constantly be in turnaround mode, a tremendous capital boost to fund not just the projects currently on the table—such as its Network Vision upgrade or iPhone deal—but more importantly what comes next. Sprint had a couple of forks it could take, including meddling with T-Mobile’s MetroPCS acquisition. But the most obvious move was to buy up the rest of Clearwire that it didn’t already own (especially if other suitors like Dish were circling Clearwire, as has been rumored). Doing so doesn’t solve all the problems it faces (most notably, it’s still battling with T-Mobile for the No. 3 spot in the market, with AT&T and Verizon quite a bit ahead in the distance), but it gives it control of an important asset and a path to a spectrum-rich future. 

 

The company’s analyst call discussing the deal was less about Sprint trumpeting its accomplishment in getting the acquisition done and more about Clearwire laying out 1) why it had few other options remaining and 2) that Clearwire shareholders are getting about as good a deal as they could hope for. Convincing those shareholders to go ahead and approve the deal may not be a friction-free process, but it’s likely to get done in short order, largely because Sprint is right. There aren’t many options left for Clearwire. As a standalone, it doesn’t have enough cash to fully launch its LTE network, nor addmittedly the requisite wholesale partners with enough scale to monetize such a network were it to launch. Everyone else, including Sprint, has found other dance partners for cash and/or spectrum and creative approaches for getting their LTE networks off the ground.

 

As for what’s next for a Sprint/Clearwire (and just as crucially, Softbank) combo, Clearwire’s got a big swath of 2.5 GHz spectrum, but it’s a flavor that isn’t used today in the U.S.—thus requiring a new wave of devices supporting the bands. And it isn’t of the same quality as lower-band spectrum, making it much more about boosting capacity in key network locations and hot-spots than delivering wide-area coverage. For that reason, Sprint will have to think creatively about how to integrate Clearwire’s TD-LTE network into its own, including determining a tower strategy that cuts costs through consolidation while maintaining key Clearwire locations that do a good job delivering a 2.5 GHz network experience.”

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