Sprint's Clearwire buyout could save unlimited data plans

Sprint's proposed $2.1 billion acquisition of the other half of Clearwire is almost bound to happen eventually, analysts say

Sprint Nextel's proposed buyout of network partner Clearwire may be inevitable, and it could help Sprint keep its signature unlimited mobile data plans alive.

The fourth-largest U.S. mobile operator is in talks with Clearwire, which supplies its 4G WiMax service, to acquire the rest of the company, according to a regulatory filing Thursday. The proposed deal is expected to depend on Softbank's pending US$20 billion takeover of Sprint, which will bring $8 billion of new investment into the carrier and make it part of a much larger company.

Sprint already holds a majority stake in Clearwire and it is the major customer of Clearwire's wholesale WiMax service. The main asset it would gain from the deal is a set of huge wireless spectrum holdings in many cities, comparable to the frequencies held by either of the dominant U.S. carriers in those areas.

Finally owning Clearwire will give Sprint a coherent set of bands for its LTE network and the largest spectrum holdings of any U.S. carrier, said Chetan Sharma of Chetan Sharma Consulting. He and other analysts don't expect the U.S. Federal Communications Commission to block this consolidation of spectrum.

For consumers, the Softbank and Clearwire deals could mean Sprint's unlimited monthly data plans will be offered for a long time. It's expensive for a carrier to offer unlimited data because of the demands it can create on a network, but Sprint would be in a better position to keep those going after these deals, he said.

"Given the additional spectrum, as well as the cash infusion, I think they're likely to keep the unlimited model for a longer duration," Sharma said.

A buyout might bring a sigh of relief to Sprint and Softbank.

Sprint formed Clearwire in 2008 as a joint venture with an existing company by that name, which sold fixed wireless service. Google, Intel and several big cable operators invested heavily in the company. But Clearwire has never become profitable, and the network technology it uses was leapfrogged by LTE. Both Sprint and Clearwire are now moving into LTE, though they are still partners in providing 4G with the older system.

Though Sprint owns more than half of Clearwire and supplies most of its customers, it doesn't have a majority on the company's board. It took lengthy negotiations just to hammer out the deal under which the partners currently share their networks. That complicated relationship has to come to an end, analysts said. Jack Gold of J. Gold Associates compared it to a couple that's been dating for years.

"Either break up or get married," Gold said.

Even assuming that Sprint's $2.1 billion offer for the remainder of Clearwire includes taking on its debt, which is at least $4 billion, it would probably be a bargain price, said Recon Analytics analyst Roger Entner.

"If this is the final price, then it's certainly not a home run for Clearwire investors," Entner said. Indeed, some shareholders have already protested a Sprint buyout.

However, talks are still going on and Sprint may offer more before the deal is done.

"I think it's mostly a trial balloon," Entner said. "The price can certainly always go up."

Sprint runs the risk of having another carrier buy Clearwire out from under it, Gartner analyst Philip Redman said. "This is all about more spectrum for LTE and positioning for the future," he said.

However, the nature of Clearwire's spectrum, which is around 2.5GHz, limits the company's ability to attract other bidders, Sharma said. Clearwire has disclosed several times that it has sought to sell off some of the spectrum.

"I really doubt there will be any serious bidders," Sharma said. The high frequencies don't penetrate walls as well as other bands, such as the 700MHz spectrum used by Verizon Wireless and AT&T, and they are not contiguous because they were pieced together, he said. As a result, Sharma doesn't think the price for the company will go up by much.

Stephen Lawson covers mobile, storage and networking technologies for The IDG News Service. Follow Stephen on Twitter at @sdlawsonmedia. Stephen's e-mail address is stephen_lawson@idg.com

Join the newsletter!

Error: Please check your email address.
Rocket to Success - Your 10 Tips for Smarter ERP System Selection

Tags business issuestelecommunicationCarrierssprint nextelmobileClearwireMergers and acquisitions

Keep up with the latest tech news, reviews and previews by subscribing to the Good Gear Guide newsletter.

Stephen Lawson

IDG News Service
Show Comments

Most Popular Reviews

Latest Articles

Resources

PCW Evaluation Team

Sarah Ieroianni

Brother QL-820NWB Professional Label Printer

The print quality also does not disappoint, it’s clear, bold, doesn’t smudge and the text is perfectly sized.

Ratchada Dunn

Sharp PN-40TC1 Huddle Board

The Huddle Board’s built in program; Sharp Touch Viewing software allows us to easily manipulate and edit our documents (jpegs and PDFs) all at the same time on the dashboard.

George Khoury

Sharp PN-40TC1 Huddle Board

The biggest perks for me would be that it comes with easy to use and comprehensive programs that make the collaboration process a whole lot more intuitive and organic

David Coyle

Brother PocketJet PJ-773 A4 Portable Thermal Printer

I rate the printer as a 5 out of 5 stars as it has been able to fit seamlessly into my busy and mobile lifestyle.

Kurt Hegetschweiler

Brother PocketJet PJ-773 A4 Portable Thermal Printer

It’s perfect for mobile workers. Just take it out — it’s small enough to sit anywhere — turn it on, load a sheet of paper, and start printing.

Matthew Stivala

HP OfficeJet 250 Mobile Printer

The HP OfficeJet 250 Mobile Printer is a great device that fits perfectly into my fast paced and mobile lifestyle. My first impression of the printer itself was how incredibly compact and sleek the device was.

Featured Content

Latest Jobs

Don’t have an account? Sign up here

Don't have an account? Sign up now

Forgot password?