Sprint set to become 'spectrum powerhouse'

Softbank deal and likely Clearwire buyout pave way for aggressive Sprint moves

Sprint shareholders Tuesday set the stage for a potentially massive change in the wireless carrier competitive landscape by approving SoftBank's bid to buy 78% of the company for $21.6 billion.

Sprint can use cash from the Softbank deal to help finance a likely purchase of Clearwire, analysts say. Clearwire shareholders are scheduled to vote on whether to accept Sprint's bid for the company early next month.

A purchase of Clearwire, in turn, would give the number three carrier Sprint about the same amount of combined spectrum of the nations top two carriers, AT&T and Verizon Wireless, said analyst Roger Entner of Recon Analytics.

"Sprint would have a boatload of spectrum with Clearwire, and Softbank knew this all along," Entner said. "Sprint can turn into a spectrum powerhouse and can easily provide unlimited data to customers for a really long time without going back to any auctions."

Sprint, with less than half as many subscribers as either AT&T or Verizon (each with more than 100 million) would find itself in the desirable position of having an ability to quickly grow its customer base, he said.

Bill Menezes, an analyst at Gartner, did add that even with greater size and spectrum gained with the Softbank and Clearwire deals, Sprint would "still have to execute to be truly competitive with AT&T and Verizon."

"Sprint needs to hustle to keep their LTE network upgrades on track and start leveraging the big spectrum expansion that Clearwire enables," Menezes said. "It won't be easy. It won't be enough to match AT&T or Verizon. They'll have to come up with offers that are more compelling in terms of price and performance to start winning away customers from the bigger guys."

Menezes predicted that Sprint will come up with deals like cut-rate prices on phones and mobile data services to grab consumer attention.

Entner is convinced the Federal Communications Commission will approve a Clearwire acquisition, and agreed with other analysts that FCC approval of the Softbank deal is imminent.

Both the U.S. Senate and the Justice Department have already approved the Softbank deal. Sprint said the deal should close in early July.

"The close of the SoftBank acquisition should now allow the new Sprint to execute on its plans with greater financial freedom and hopefully more success than before," Entner said.

Japan's SoftBank battled Dish Network to buy Sprint. SoftBank raised its bid to $21.6 billion on June 10 from the original $20.1 billion and raised the cash amount going to shareholders by $4.5 billion. Dish subsequently abandoned its attempts to acquire Sprint.

In the Sprint-SoftBank deal, SoftBank is giving Sprint shareholders $16.6 billion in cash and giving Sprint $5 billion in capital for a 78% stake. Originally, SoftBank was giving $12.1 billion to shareholders and $8 billion to Sprint in capital for a 70% stake.

Sprint has also fought Dish over the buyout of Clearwire, recently raising its bid to $5 a share from $3.40 to outbid Dish's bid of $4.40 a share. The Clearwire shareholders will vote on that deal on July 8. The Clearwire board and minority shareholders support the $5 per share bid.

Sprint owns a majority stake in Clearwire, valued at about $14 billion, which means it would need $5 billion to $6 billion to buy Clearwire outright, Entner said.

SoftBank CEO Masayoshi Son has said that Sprint will hold on to to its unlimited smartphone data plans. In an interview with the Wall Street Journal, Son also said that putting Sprint on par with AT&T and Verizon in spectrum holdings will "stimulate the whole industry in terms of both innovation, the prices, services, everything."

Matt Hamblen covers mobile and wireless, smartphones and other handhelds, and wireless networking for Computerworld. Follow Matt on Twitter at @matthamblen, or subscribe to Matt's RSS feed . His email address is mhamblen@computerworld.com.

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