What's the Deal With Clearwire's Sudden Surge?

There's serious change afoot in the wireless industry -- price wars and maybe even new merger deals.

Share prices jumped all over the regional and second-tier wireless service sector on Friday. Leading the charge, Clearwire (UNKNOWN: CLWR.DL  ) soared as much as 11.7%. Guggenheim analyst Shing Yin speculates that ultra-tight Clearwire partner Sprint Nextel (NYSE: S  ) might use cash from the pending merger with Japanese peer SoftBank to grow domestically.

Yin's primary Sprint target would be MetroPCS (NYSE: TMUS  ) , which already has a deal in place to merge with T-Mobile USA. MetroPCS shares jumped as much as 5.6% as the potential bidding war started to sound doable. But the next logical step -- or an alternative one, in case MetroPCS isn't on the table -- would be to turn Sprint's major ownership of Clearwire into a fully consummated merger. Hence, Clearwire's even larger gain.

That idea also resonated across the industry. If Sprint starts meddling with T-Mobile's buyout plans, or just goes looking for additional spectrum licenses and customer lists on its own, other smallish operators would suddenly walk around with targets painted on their backs. Being the most obvious secondary target once T-Mobile and MetroPCS are out of the running, Leap Wireless International (NASDAQ: LEAP  ) gained 5.2% at most.

The SoftBank-Sprint deal is shaking up the American phone service sector even before it passes regulatory hurdles. Industry giants AT&T (NYSE: T  ) and Verizon (NYSE: VZ  ) must be shaking in their boots as the industry consolidates around and against them.

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  • Report this Comment On December 02, 2012, at 3:51 AM, nivegulu wrote:

    I really don't know why S would go after crapola like PCS which has no basic intrinsic value. Everyone is going to migrate to the best network which will be proportional to spectrum capacity and the latest tech. tdd-lte. Once N.V is launched the churn from other carriers to S/SB/clwr will be parabolic obviating the need for acquiring junk like leap, pcs etc.

    So, now S is going to buy PCS, and Softbank is going to get [S + PCS] for the same $20.1B when the S/SB deal closes?! - makes a lot of (non)sense to me. Yang in the Yin(g). And by the way as a consequence, Mc... does'nt get "made whole" for the next 3(00) years (talk about "breach of fiduciary duty" towards the common class A in an (un)timely fashion) . And in the meantime CLWR could get taken out completely by someone like msft, aapl, amzn, chl, ctl, t, vz, goog,... right from under S's nose. Then N.V NeVer gets completed ever. "Makes a Whole" (pun intended) lot of sense to me now.

    Also, the DOJ is going to be very (un)happy at approving this merger of {[S+SB+PCS] + 50.8% clwr} from a monopolistic viewpoint?. Looks like Yi.. was long on PCS after the dip (after the DT deal). SEC ......zzzzzzzzzzzzzz?.

  • Report this Comment On December 02, 2012, at 3:55 AM, nivegulu wrote:

    CLWR - look at the company's spectrum value:

    http://www.businessweek.com/magazine/content/10_22/b41800353...

    Excerpt:

    "The $5 billion Clearwire will pay its license holders for its spectrum over the next three decades is a bargain compared to what its rivals are paying. (Clearwire's $20 billion valuation of its spectrum may prove to be conservative; J.H. Snider, president of policy think-tank iSolon.org and former research director at the New America Foundation's Wireless Future Program, puts the number closer to $50 billion.) AT&T and Verizon bought their spectrum that can be used for 4G at government auction in 2008, paying a combined $16 billion."

    and that was in 2010 before the exponential boom in mobile devices. So, what could the Enterprise Value of Clear be today? - certainly not $2 pps.

  • Report this Comment On December 03, 2012, at 2:00 PM, spokanimal wrote:

    A bid for MetroPCS would probably incite a messy and expensive battle for control with T-Mobile...

    ... whereas a buyout of Clearwire would provide Sprint access to an ocean-liner full of valuable spectrum for pennies on the dollar.

    Last I checked, Softbank was running the same TD-LTE protocol on 2.5 ghz spectrum in Japan as Clearwire is implementing in the U.S...

    ... and softbank's main financier for the sprint deal insisted that sprint own more than 50% of clearwire before they would clear the bid for sprint.

    This whole thing is just one, big, duuhhhh... it couldn't BE more obvious where clearwire sits in all of this it it jumped out and bit you right on the NOSE.

    Spokanimal

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