Sprint-Clearwire-Softbank Partnership, Not Good For Rivals

Sprint-Clearwire-Softbank Partnership, Not Good For Rivals
By Sprint Nextel [Public domain], via Wikimedia Commons

Sprint-Clearwire-Softbank Partnership, Not Good For Rivals

Sprint Nextel Corporation (NYSE:S) is a holding company, with its operations primarily conducted by its subsidiaries. The Company operates in two segments: Wireless and Wire line. The company missed out on the recent quarter earning, but with the acquisition of Clearwire Corporation (NASDAQ:CLWR), the company has increased its depth of the spectrum and can be a good addition in one’s portfolio for the long term. For a  long time now this carrier has found it hard to make a mark in a wireless industry still dominated by Verizon Communications Inc. (NYSE:VZ) and AT&T Inc. (NYSE:T), to a large extent. Even in its LTE rollout, Sprint Nextel Corporation (NYSE:S) is well behind the two rivals. But with Clearwire’s huge spectrum and Softbank’s backing, the carrier could soon be a major player as spectrum become scarcer, high-speed 4G LTE becomes standard norm and subscribers get hungrier for data.

Mixed Financials

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For the quarter ending September 30, the company reported an operating loss of $231 million. They also recorded a net loss of $767 million and a diluted net loss of $.26 per share for the third quarter of 2012, as compared to a net loss of $301 million and a diluted net loss of $.10 per share in the third quarter of 2011. Sprint’s third quarter 2012 results includes accelerated depreciation of $397 million, or negative $.13 per share (pre-tax), primarily related to Network Vision, including the expected shutdown of the Nextel platform. Revenue for the period jumped 6% yearly, but a decrease from revenues of $8.8 billion in Q2 2012. The report was mostly mixed. Sprint’s revenues were a little light, with earnings per share beating estimates.

As always, the iPhone plays the most important role in Sprint’s story, and this quarter according to the company, it activated 1.5 million iPhones. That’s flat as compared to 1.5 million last quarter, and 40% of that denotes new customers. Post-paid subscriber base enhanced with net additions of 410,000.

Sprint Nextel Corporation (NYSE:S) reported wireless service revenues of nearly $7.3 billion during the quarter, an increase of nearly 6% year-over-year. Wireless service revenues for the Sprint platform increased by 14% year-over-year, driven by postpaid ARPU growth of $3.01 and continued subscriber growth.

Acquisition of Clearwire- the turnaround

Sprint Nextel Corp. has settled an agreement with the Clearwire Corporation (CLWR) to purchase all the remaining shares for $2.97 each. Clearwire Corporation (NASDAQ:CLWR) management believe that after taking into consideration all other strategic alternatives, this seems to be the best option and a failure to finalize this deal will lead to restructuring. Both the Softbank-Sprint deal and the Sprint-Clearwire deal (contingent on the Softbank deal) are probable to close in the middle of the next year. In January, Sprint will begin loaning Clearwire $80M per month up to a maximum of $800M. The loan is exchangeable into Clearwire Corporation (NASDAQ:CLWR) shares at $1.50 per share, giving Sprint another 320M shares if the deal closes by mid next year.

Sprint-Clearwire-Softbank Partnership, Not Good For Rivals

If the FCC accepts this transaction, Sprint Nextel Corporation (NYSE:S) will be the largest spectrum holder in the United States with an average of just over 200 MHz of the spectrum across the country. According to the National Broadband Plan, there is 547 MHz of spectrum useable for wireless broadband. Sprint, if the transaction is approved will possess more than a third of the available spectrum allocated by the U.S. government, but with less than one sixth of U.S. customers. That gives Sprint (on average 200 MHz and 56 million subscribers) the chance to use roughly 3.57 MHz of spectrum to support each of their subs. Compare that to a Verizon (on average 105 MHz and roughly 100 million subscribers) which has only 1.05 MHz of spectrum to upkeep each customer’s uses. More spectrums mean faster speeds, more capacity, and a stronger competitive position.


By being the biggest spectrum possessor in the United States, owning approximately as much spectrum as AT&T Inc. (NYSE:T) and Verizon Communications Inc. (NYSE:VZ) combined, and having fewer subscribers than both, Sprint will have better elasticity to advance its network and business plans to contend with Verizon Communications Inc. (NYSE:VZ) and AT&T Inc. (NYSE:T) than even T-Mobile. As spectrum is the key to run these operators. The transformation in the competitive scenario can be truly strong. With massive spectrum, Sprint can build an LTE Advanced network the right way as it has considerably less traffic on its network. Having additional spectrum than its competitors will help Sprint  offer the best combination to consumers – low prices and better speed.

Investment in wireless network

Sprint has propelled 4G LTE in 49 markets including Dallas, Houston, Atlanta and Baltimore, and sites are on-air, execution is in progress in other markets as well. In fact, Sprint has declared almost 150 markets that should experience an official LTE launch in the coming months. Sprint has also applied 3G service improvements in more than 70 markets, from Asheville, N.C., to Philadelphia and from Hudson, N.Y., to Santa Barbara, Calif.

Customers can anticipate experiencing the following performance improvements:

  • Faster data speeds that allow instant Web access for news updates, HD viewing and game-playing, faster video downloads and clear video chats.
  • Stronger signal strength when making a call or using the Web.
  • Fewer dropped calls.
  • Enhanced voice quality and less static or background noise when making phone calls.

Sprint Nextel Corporation (NYSE:S) is the only national wireless carrier to offer truly unlimited 4GLTE data plans. The company launched its all-new 4G LTE network in July 2012 and now offers service in 49 markets.


The recently announced Sprint Nextel Corporation, (NYSE:S) Clearwire Corporation (NASDAQ:CLWR) deal brings a substantial change in the company’s financial and competitive position, and is another breakthrough which has been achieved by Sprint. Pooled with the new spectrum holdings, this would empower the company to strive more efficiently and aggressively from next year onwards, when its LTE network is fully functional and comes online. Even though, there is much possibility of its margin to remain under pressure due to substantial capital spending, the accomplishment of the deal at $2.97 will be an encouraging action for the shares of the company as well as its long-term health. Moreover, after the procurement of Clearwire, Sprint’s enlarged spectrum depth increases the possibilities of it evolving as a very strong rival to AT&T Inc. (NYSE:T) and Verizon by the end of next year.

Even though the company still has to travel a long way to match its bigger rivals, it has taken a solid move towards a chance to compete more effectively. Enhanced spectrum position, liquidity and better operations can be the potential it needs to carry its share price to the new heights, in the coming days.


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