Google Pulls Out of Clearwire

Posted by Sam Churchill on

Google will sell its $500 million stake in Clearwire for $47 million, reports The Verge. Google today filed documents with the SEC in preparation for the sale of its entire stake in the troubled Clearwire Corporation.

Google’s 6.5 percent would sell for a proposed $1.60 share price, dramatically undercutting the current $2.27 level. This will put even more pressure on the financially constrained Clearwire. If cable operators sell their 11% share, it would only make matters much worse for Clearwire. Then there’s Intel, which has a 6.9% share with a $1b investment.

Google had a 3.4% ownership share with a $500m investment. Cable operators, however, are still Clearwire’s largest strategic investors. Comcast invested $1,050m (7.2%), Time Warner Cable invested $550 (3.8%) and Brighthouse Cable, $100m (0.7%), for a total of approximately $1.7 billion investment at a 11% ownership share of the company.

Those same cable operators are now in bed with Verizon.

Verizon is buying cable’s AWS spectrum for $3.6 billion, putting that 11% ownership share into possible play, as cable couples with Verizon rather than Clearwire.

The 700 and 850 MHz bands are better for mobile devices, but the low band means more people share a tower and self-interference limits tower density (and capacity). That will likely limit 700 MHz capacity in a couple of years. The next best spectrum would be PCS (at 1.9 GHz), AWS (at 1.7/2.1 GHz) and Dish’s MSS (at 2.1 GHz).

Clearwire has spectrum to burn, but its 2.6 GHz band is better for high-density urban environments and for bandwidth hungry applications like streaming video. Their tower density has to be high, because coverage range is low. With ordinary tower density, WiMAX at 2.6 GHz works better as a DSL replacement than as a mobile data service. Same deal with LTE. Sprint hopes 4X2 MIMO on TD-LTE will punch it through.

There’s a lot of hand-wringing over lack of spectrum. But Clearwire has 140 MHz and Dish adds 40 MHz more of nation-wide spectrum. Cheap 2.4/2.5GHz hotspot/relay stations could fill in the blanks – indoors and out. No sweat.

Intel wrote off $938 million of its Clearwire investment in 2009. Sprint owns the majority of Clearwire, but doesn’t have voting control. In December, the company had said it was raising $595 million through two sales of common stock to build its LTE network and announced 2011 revenues of $1.25 Billion.

Clearwire is spectrum rich but cash poor.

Clearwire says it ended 2011 with 10.4 million subscribers which includes approximately 5.9 million wholesale subscribers, almost all of which came from Sprint. CLEAR WiMax was available in 71 markets in the United States covering an estimated 131.9 million people at the end of 2011.

We intend deploy LTE on our network. Initially, we plan to overlay up to 8,000 of our existing mobile WiMAX sites with TDD-LTE over 20 MHz-wide channels. We plan to focus primarily on sites in densely populated urban areas where we currently experience the highest concentration of usage of our mobile WiMAX services, although we will also consider sites in other areas where Sprint and other current and future wholesale partners express a need for excess data capacity and where we believe we will be most likely to generate sufficient revenues. We believe that the scope of our planned LTE deployment will provide us with the best opportunity to generate significant wholesale revenue from Sprint and other prospective wholesale partners over the long term.

Clearwire, in an SEC filing, that it will need to raise more cash to transition to LTE:

Sprint currently offers mobile WiMAX services as part of a bundled Sprint-branded offering. Sprint also agreed to purchase LTE services over Clearwire’s TD-LTE network, leveraging Sprint’s existing 3G and their planned FD-LTE service.

Google, Amazon and Apple will have to do something. Two words: Kindle Fire. Soon 7″ and 10″ tables will be consuming 1-2 GB multi-media magazines and newspapers on a daily basis. They are going to bring today’s broadband networks to their knees.

If Google pulls out of Clearwire, where else could they go? Dish’s 2.1 GHz MSS spectrum or Verizon’s AWS are the choices. AT&T’s got nothin’ beyond 700 MHz.

If Google wants to invest in spectrum, Dish and Android-friendly T-Mobile USA might be a better partner with streaming video, voice and mobile data. Money buys wholesale access. Cheap broadband sells devices, apps, content and ads.

Google, of course, is already invested in O3B Networks, a world-wide satellite-based backhaul system with partner SES. It is expected to launch early in 2013. O3B will provide cellular carriers with backhaul, providing access to approximately 70 percent of the world’s population.

Clearwire is interesting because it’s sitting on 140 MHz of LTE spectrum in the international 2.6 GHz band.

AT&T would have little choice if they can’t merge with or buy Dish. They’d have to buy 2.5 GHz from Sprint/Clearwire. The TV band auctions won’t happen for years, and finding another 20-40 MHz chunk of spectrum would be nearly impossible.

Clearwire and China Mobile have their TD-LTE Industry Alliance. That means iPhone5 handsets for China Mobile could work in the United States. TD-LTE at 2.6 GHz excels at high-density urban environments and can handle video-hungry tablets.

Meanwhile, T-Mobile USA will launch LTE in 2013 using the extra AWS spectrum they got from AT&T as part of the settlement for their failed merger. T-Mobile expects to deploy LTE to the top 50 markets with 20 MHz service in 75 percent of the top 25 markets in a couple of years.

T-Mobile will free up about 10-20MHz of AWS (1.7/2.1 GHz) for LTE. Dish’s 40 Mhz of nationwide 2.1 GHz spectrum might use T-Mobile’s LTE infrastructure immediately. With the addition of Dish, that’s probably 20 MHz extra for wholesale. LTE-Advanced provides carrier aggregation — “bonding” separate bands together.

Currently, neither Verizon nor AT&T have any AWS infrastructure. They’d have to build it from scratch.

What does it mean? Here’s my speculation:

  • Google has a tentative agreement with Dish & T-Mobile for 2GHz MSS, pending FCC approval.
  • AT&T and Apple will buy Clearwire spectrum wholesale.
  • Amazon and Microsoft will stay out of wholesale. They’ll do partnerships.

The most likely scenario: none of the above. Google and Microsoft could be planning a White Spaces play, for example.

One thing’s certain; there will be fireworks at Mobile World Congress in Barcelona next week.

Related Dailywireless articles include; FreedomPop: Free Internet Access on Clearwire?, Canada to Get Apple’s iTV?, Dish Clarifies LTE-Advanced Plan, China iPhone Projections, Clearwire and China Mobile Announce TD-LTE Testing Plan, LTE Situation Report, Clearwire: Dead or Alive?, Dish LTE-Advanced Called “Ollo”, Sprint’s Network Vision Detailed, Clearwire Chooses LTE Advanced, China Mobile + Clearwire + Apple?, Will Sprint Go TD-LTE?, WiMAX to TD-LTE: Everybody’s Doin’ It, Speculation on Sprint Infrastructure, China Mobile Talks Up TD-LTE iPhone, World’s First TD-LTE Service Launched by Mobily, Europe’s Digital Divide Auction, German LTE: Goes to 100, Spectrum Drama: Made for TV, LTE Spectrum: It’s War, German 4G Auction: It’s Done, Auctions Winding Down in Germany & India, Germany 4G Auctions Begin, Europe to Follow, EU: Global LTE Roaming at 1.8 GHz, T-Mobile Makes Its (4G) Move, End Near for Indian WiMAX?, WiMAX & LTE: Policy Vs Pragmatism, Intel: LTE Not Nail in Coffin, India’s Broadband Auction: It’s Done, India’s Broadband Auction: No Free Lunch, TD-LTE Gains Momentum, WiMAX Forum: Not Dead Yet, Yota Dumps WiMAX, UK Getting LTE, WiMAX to TD-LTE: Everybody’s Doin’ It, Speculation on Sprint Infrastructure, LG Telecom: CDMA & LTE Handover, Australia: WiMAX to TD-LTE, LTE-Advanced Progress, Ericsson Demos 1 Gbps Advanced LTE, Sprint’s LTE Advantage, LTE-Advanced Tested in Korea.

Posted by Sam Churchill on Friday, February 24th, 2012 at 10:09 am .

Leave a Reply