Full Clearwire Buyout Necessary for Sprint Long-Term Survival

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.

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