(By Mani) Sprint Nextel Corp. (NYSE:S) achieved what it wanted – unfettered access to the spectrum of Clearwire Corp. (NASDAQ:CLWR) -- by boosting its stake to 50.8 percent. The news triggered a sell-off in Clearwire shares as investors were hoping that Sprint would buy all of Clearwire following its $20.1 billion deal with Japan's Softbank.
Sprint acquired 30.9 million of Clearwire's Class A shares and 2.73 million of its Class B shares from telecom investor Craig McCaw's investment vehicle Eagle River Holdings LLC.
Shares of Bellevue, Washington-based Clearwire fell 10 percent on the news. They have been trading between $0.83 and $2.96 during the past 52-weeks.
The latest move suggests that Overland Park, Kansas-based Sprint is in no hurry to take full ownership of financially-challenged Clearwire, in which Sprint had a 48 percent stake. Now, with more than 50 percent stake, Sprint has more control over Clearwire's spectrum assets, which is crucial for Sprint's high-speed wireless network.
Sprint is making solid progress in deploying its own 4G LTE capacity on a national scale, including in markets where Clearwire intends to build 4G LTE. So, if Sprint buys Clearwire there may overlapping in some of the markets.
Meanwhile, a controlling stake in Clearwire via Sprint is detrimental to Softbank, which uses a similar kind of spectrum in Japan, and is crucial for the Japanese carrier's U.S. ambitions.
Why Clearwire Matters To Sprint?
Sprint, the third largest wireless carrier in the U.S., needs Clearwire as it buys wholesale access to Clearwire's network and resells it as "Sprint 4G." Clearwire's 4G network spans the nation and covers over 130 million people in approximately 80 U.S. markets. In the 4G space, spectrum is what matters most. Clearwire has the spectrum to alleviate other wireless operators' capacity issues via a wholesale business model.
Clearwire has publicly stated that it has 60 MHz of spectrum beyond its operating needs in the top 100 Metropolitan Statistical Areas (MSAs). Clearwire owns or leases spectrum covering about 46.6 billion MHz-POPs nationwide. At current share prices, the analyst estimate the market is valuing the spectrum at less than $0.15 per Mhz-POP.
On the technological front, Clearwire spectrum's attractiveness continues to improve given that many of the world's LTE networks look to be deployed in the 2.3-2.6MHz range.
Clearwire's spectrum is the most sought after as the nature of the U.S. spectrum crunch is most acute in densely populated metropolitan areas – where the higher frequency is less of an impediment, particularly with the widespread deployment of DAS systems. Distributed antenna aystem, or DAS, help provide coverage over the same area as a single antenna, but with reduced total power and improved reliability.
Earlier in the week, Sprint's board approved a deal under which Softbank will acquire approximately 70 percent of Sprint in the largest Japan outbound deal on record. Softbank will invest $20.1 billion in Sprint, with $12.1 billion going to current shareholders, and the other $8 billion in the form of additionally issued shares. Sprint shareholders will have the option to exchange their shares for $7.30 in cash or for shares in new Sprint.