Sprint Won’t Buy Clear – For Now

Posted by Sam Churchill on

Sprint is not planning to buy the other half of Clearwire — at least for now — reports Bloomberg. Sprint has no intention of taking part in mergers or acquisitions until the Softbank deal is finalized in mid-2013, reports Fierce Wireless. That implies that Sprint will also not move to disrupt the T-Mobile/MetroPCS merger, which is expected to close in 2013 Q2.

Many industry analysts believe Softbank is looking at the 2.5/2.6 GHz TD-LTE spectrum. Clearwire has around 130 MHz of spectrum across major markets in the United States, notes Fierce Wireless.

Clearwire’s market cap is currently about $4 billion (of which Sprint already owns half). Even with a 50 percent premium, Sprint could buy out Clearwire for $3 billion.

Softbank will pay $12.1 billion to Sprint shareholders and the deal includes $8 billion of new capital, according to their statement yesterday.

So how much is Clearwire’s spectrum worth, and is that why Softbank is interesed in Sprint? And what about the 40 MHz owned by Dish Networks? Money and finance is not my thing, but let’s try and make sense of this deal, anyway.

The standard method of placing value on spectrum is MHz-pops. It’s the amount of MHz of spectrum associated with a particular license multiplied by the number of people in that license’s region. Clearwire covers 130 million people and has about 130 MHz of spectrum.


Example: A License is 20.0 MHz, Covers 1 million pops; Sales price is $10 million;

Price per MHzPop = $10,000,000 / (1,000,000 x 20.0)
Price per MHzPop = $0.50

If Clearwire’s license is 130 MHz, Covers 130 million pops; Sales price is $5 billion;

Price per MHzPop = $5,000,000,000 / (130,000,000 x 130.0)
Price per MHzPop = $.29


I’m guessing that Clearwire’s spectrum (at $.29 MHz-Pop) would make their frequencies worth $5 billion, which is more than the company’s current market cap (at $4 billion). I image their current coverage of 130 million people, could also be extended without buying any more 2.6 GHz spectrum (although a build-out would be expensive).

With Clearwire, Softbank wouldn’t just be buying spectrum; they would be getting infrastructure; towers, backhaul, basestations — and 11 million revenue generating subscribers. How much would you pay now?

Verizon paid $3.9 billion, or $0.69 per MHz-POP for their AWS spectrum, picked up from cable operators (SpectrumCo). That’s a big jump from the $2.4 billion, or $0.45 per MHz-POP, that the cable operators paid in 2006. The cable spectrum covers 259 million POPs, and averaged around 20 MHz.

Dish has twice the spectrum. Clear has 5 times more than Verizon got for $3.9 billion.

According to Forbes, if Dish’s 40 MHz of spectrum is worth the same $0.69 price per MHz-POP that Verizon paid for AWS spectrum (in the SpectrumCo deal), then the Dish spectrum might be valued at $8.6 billion, estimates Credit Suisse analyst Jonathan Chaplin. Dish’s unique 40 MHz slot ought to be worth at least $6 billion.

By 2015, the number of mobile broadband connections is expected to triple, with smartphone connections increasing five times over today’s level. Clearwire has 2-3 times the 40 MHz of bandwidth that Dish has available, although the higher frequency (2.6 GHz) limits Clear’s range and penetration.

Ericsson will build a 2.3 GHz fixed wireless TD-LTE network for rural Australia, extending the country’s National Broadband Network to remote villages.

Australia’s TD-LTE network, scheduled to be completed by 2015, will support peak downlink speeds of 12 Mbps. Perhaps Dish’s 2.1 GHz spectrum might also provide fixed access in the United States.

An $8 Billion investment in Dish and Clear spectrum might be a good bet for Softbank. Softbank is a year ahead of the United States. They understand infrastructure cost/benefits and are willing to take a risk. It’s really a bet on the demand for urban hotzones. Softbank sees a demand. They understand TD-LTE infrastructure.

Spectrum is bound to get more valuable, especially if people start watching video on tablets. Macrocells aren’t the solution. You’ll need 2 GHz and higher microcells, to deliver the required dense capacity, according cellular engineers. They can reduce the cost of broadband by half.

Dish and Clear could deliver a triple play with Sprint/Softbank.

Perhaps ad networks, driven by Google, Microsoft and Amazon, will provide a wholesale demand for these dense urban hot zones. But they’ll need to be coupled with old-fashioned macrocell towers, in the 600-800 MHz range, to deliver wide coverage.

Amazon’s LTE Kindle comes with a $50 yearly data plan with access to 250MB of data every month. Google, Apple and Microsoft might package similar data plans with their devices.

A Mobile Virtual Network deal with AT&T might provide the best of both worlds – 700 MHZ LTE for suburbs and lightRadio TD-LTE/WiFi for the urban core. China Mobile will carry the Lumia 920T which supports TD-LTE at 2.6 GHz. AT&T could do the same thing. WiFi could be free (with ads). Softbank is the enabler.

Posted by Sam Churchill on Tuesday, October 16th, 2012 at 11:48 am .

Leave a Reply