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
IDG News Service - 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.
- Big Data, Big Mess: Sound Risk Intelligence Through Complete Context This paper examines the insecurity of the small businesses in the supply chain and offers tips to close those backdoors into the enterprise.
- Using Cyber Insurance and Cybercrime Data to Limit Your Business Risk This paper examines the challenges of understanding cyber risks, the importance of having the right cyber risk intelligence, and how to use this...
- 5 Tips to Secure Small Business Backdoors in the Enterprise Supply Chain This paper examines the insecurity of the small businesses in the supply chain and offers tips to close those backdoors into the enterprise.
- Confront consumerization with convergence Virtualization expert Elias Khnaser spotlights the security, compliance, and governance issues that arise when enterprise users "consumerize" with shadow IT and public cloud...
- NSS Labs & Cisco Present: Evaluating Leading Breach Detection Systems Today's constantly evolving advanced malware and APTs can evade point-in-time defenses to penetrate networks. Security professionals must evolve their strategy in lockstep to...
- Will the Real Endpoint Threat Detection and Response Please Stand Up? This webinar explores new technologies & process for protecting endpoints from advanced attackers as well as the innovations that are pushing the envelope... All Wireless Carriers White Papers | Webcasts
Our new weekly Consumerization of IT newsletter covers a wide range of trends including BYOD, smartphones, tablets, MDM, cloud, social and what it all means for IT. Subscribe now and stay up to date!