Sprint, Softbank, Clearwire Merger Clears Hurdle, but Challenges Loom
The Softbank-Sprint merger was in doubt since April, when Dish Networks attempted a last-minute takeover of Sprint and Clearwire in separate deals. Dish Networks chairman Charles Ergen made the takeover of Sprint a corporate priority, and in the process tried to throw every conceivable roadblock, ranging from national security concerns to lawsuits, in the way. Ultimately, the effort by Dish to take over Sprint and Clearwire failed when Sprint, with Softbank's backing, raised its offer for Clearwire shares to a price higher than Dish wanted to pay. This accomplished two things. First, it cleared the obstacles from Softbank's path, and second, it made Clearwire's shareholders a lot more money than originally planned. However, the higher price also hurt Softbank's finances, causing Standard & Poor's to reduce the company's credit rating to junk status from the investment grade it had once enjoyed. While there are no signs that Softbank is anywhere near default on its obligations, the higher cost of credit will complicate the growth of the newly merged company after the immediate dust clears. So what's next? Once the dust settles, the newly combined Softbank and Sprint will be able to start building out a massive LTE footprint in the U.S. This will enable Sprint to continue to offer its uncapped data plans if the company chooses to do so. It also means that the company will have a valuable edge in competition with the other three nationwide wireless carriers.Sprint, by contrast, has barely started. While it has taken baby steps in the world of LTE, both Sprint and Clearwire are burdened by a legacy WiMax network that ultimately will go nowhere. Unfortunately, Sprint must expend resources on that legacy network at least for a while. Unlike the situation with AT&T and T-Mobile, which can sell devices that support both their legacy Evolved High Speed Packet Access (HSPA+) 4G network and LTE, Sprint's devices don't do that. This means that there will be two sorts of 4G devices for at least a few years. Still, despite the financial challenges that await Softbank and Sprint and the technology challenges that are already there, Sprint is poised to make a huge move in the wireless business. AT&T and Verizon will have some real competition if all goes well. And as we know, competition is good for everyone concerned.
But having a lot of spectrum and becoming more competitive aren't the same thing. The spectrum is a valuable resource, but as the other three carriers have found out, building out a nationwide LTE footprint isn't fast or easy. While Verizon Wireless has essentially completed the build-out of its first generation LTE infrastructure, the company has yet to begin its higher-speed Advanced LTE build-out. AT&T and T-Mobile are already fielding networks that are substantially faster than Verizon's, and they still have a long way to go.