News Analysis: Sprint meetings with Clearwire and cable operators are leading to a necessary outcome if Sprint wants to remain competitive in the wireless market-a complete buyout of Clearwire.
The recently revealed
discussions between Sprint Nextel, Clearwire
and a handful of cable
operators are leading inexorably to a foregone conclusion. Sprint will have to
buy Clearwire. Exactly how the purchase will be structured is still up for
discussion, but in reality, Sprint has no choice except to buy the 4G provider
in which it already owns a majority interest.
In fact, Sprint owns 54
percent of Clearwire, the provider of most of its WiMax 4G services. The reason
is fairly simple. If Clearwire isn't viable on its own, Sprint has no
nationwide 4G. A carrier without 4G as part of its wireless services has no
future in the current market.
Complicating the matter is
the fact that part of Clearwire is owned by a gaggle of cable companies that
own small pieces, but with a few notable exceptions, none have actually made use
of any of Clearwire's 4G services. One exception is Cox Communications, which
has recently begun offering mobile phones that ride on Sprint's networks and
use Sprint 4G.
But cable companies' partial
ownership of Clearwire shouldn't make life too complicated for Sprint. The
carriers can probably convince the cable operators to sell their stakes in
Clearwire as long as Sprint is willing to provide wireless service to those operators
that want 4G services.
For Sprint, however, the
purchase of Clearwire could be a matter of life or death, depending on the
outcome of the AT&T-T-Mobile merger. If the merger goes through, Sprint
will need to have its 4G network substantially complete if it plans to compete
in the market. If the merger doesn't go through, Sprint will still have to
compete with a newly revitalized T-Mobile that has gained billions in payments
from AT&T and a chunk of AT&T's massive spectrum holdings.
This means that Sprint can't
afford to wait out the merger and see what happens. The company needs to act
soon enough to be ready for either eventuality. To accomplish this, Sprint
needs to start building out the rest of the 4G network that Clearwire hasn't
been able to afford. More importantly, Sprint needs access to the Advanced
LTE (Long-Term Evolution) technology that Clearwire is ready to deploy
While Sprint has been
selling WiMax 4G so far, it will need to move eventually to LTE to make the
most of its network. Clearwire has been building and testing LTE for some time
and, according to a variety of reports, the technology is ready to deploy.