Clearwire up for sale?

19 August 2011 | Kavit Majithia


The third largest operator in the US, Sprint Nextel, is reportedly in talks with cable companies in the region to acquire Clearwire Corp.

Financial troubles at Clearwire Corp have become public knowledge, and Bloomberg reports Sprint, Comcast and Time Warner Cable, heavy investors in the company, are considering a full acquisition to enable the build out of a high-speed wireless network. Earlier this month, Capacity reported on Clearwire’s plans to build a $600 million LTE network to upgrade from its WiMAX offering and compete directly with market dominators AT&T and Verizon.

Market watchers expressed concern over Clearwire’s finances to make such an investment following its announcement, and also questioned if the company actually has the infrastructure capability to build an LTE network that can serve high demand areas where carriers and providers need such a service. In its first proposal, it appeared Clearwire’s business model centred on providing capacity offload to directly compete with the satellite/terrestrial capacity network being developed by LightSquared, which also has a relationship with Sprint. If Clearwire is an acquisition target for Sprint, it will be interesting to see how the operator’s relationship with LightSquared is compromised.

For Sprint, investment in the wireless space is necessary if it is to realistically compete with Verizon’s next generation offering and AT&T’s huge spectrum capacity – which is only set to increase if its acquisition of T-Mobile USA is approved by regulators. William Stofega, analyst at IDC said it is essential that Sprint looks at ways to expand its portfolio to compete with the two larger players in the market.

“Sprint is not in a great place,” he said. “It was important to reach out to cable companies in the country and attempt to work together, take a piece of the wireless space and it the own - Sprint must focus on a certain segment in a mass market.”

Its financial report in July showed a 15th consecutive quarterly loss, which will not fare well with customers or investors. An acquisition of Clearwire in partnership with entering the cable segment may make the company a more attractive proposition, particularly considering the advantages of Triple Play which Sprint could effectively use to trump AT&T and Verizon by offering a package deal for television as well as telephone to its subscribers. It will be interesting to monitor how this clouded issue in US telecoms takes shape over the next few weeks.