How AT&T Is Helping Clearwire

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Clearwire (Nasdaq: CLWR  ) can thank AT&T (NYSE: T  ) for today's rally. The stock is up more than 4% as I write this, following analyst upgrades of its controlling parent, Sprint Nextel (NYSE: S  ) .

The buying makes sense. Not only does Clearwire trade for a severe discount to the market value of its principal asset (i.e., wireless spectrum), but the New Ma Bell's proposed $39 billion purchase of T-Mobile USA from Deutsche Telekom gives Sprint a powerful new reason to settle its pricing dispute with Clearwire.

These companies need each other. Acquiring T-Mobile gives AT&T ample new spectrum to expand its GSM network for both voice and data services. From there, it's a race to upgrade the infrastructure from T-Mobile's HSPA-based 3G-plus service to 4G service based on LTE. It'll be a while before either company reaches the finish line.

Call it cold comfort for Sprint, which can't afford to sit idly as AT&T and Verizon (NYSE: VZ  ) deploy massive 4G networks to serve the hundreds of millions of Americans who want to see President Obama make good on promises to expand the Broadband Web to the far corners of America.

Sprint would say it has options when it comes to playing a role in the president's plan. For example, the company is in talks with LightSquared, a terrestrial and satellite-based LTE network operator that expects to be fully deployed by 2015.

That no longer makes sense. Sprint Nextel needs a partner that is nearing full 4G deployment; that way, it can bludgeon rivals as "slow" and "old" while positioning itself as the most modern choice. LightSquared could fit the bill someday, but with operations already up and running in dozens of U.S. cities, Clearwire is the best choice right now.

Do you agree? Disagree? Let us know what you think about the AT&T and T-Mobile merger, Sprint's survival strategy, and the rise of 4G wireless networks using the comments box below.

You can also rate Clearwire in Motley Fool CAPS and keep tabs on the company by adding the stock to Your Watchlist for free, personalized stock tracking.

Fool contributor Tim Beyers is a member of the Rule Breakers stock-picking team. He didn't own shares in any of the companies mentioned in this article at the time of publication. Check out Tim's portfolio holdings and Foolish writings, or connect with him on Twitter as @milehighfool. You can also get his insights delivered directly to your RSS reader. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool is also on Twitter as @TheMotleyFool. Its disclosure policy is feeling free and clear today. Ahhhhhhhhh.

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  • Report this Comment On March 22, 2011, at 3:15 PM, Aryabod wrote:

    I have said this before, Sprint's decision to buy Clearwire will be contingent upon how well it adheres to Sprint's goals. As a 56.6% owner it has substantial commitments to Clearwire that would be difficult to jettison and Clearwire's survival as a viable entity without Sprint is almost a nonthought.

    With over 120 million POPS of WiMax already in place which can easily be upgraded to WiMax 2 (IEEE 802.16m) Sprint can easily continue to remain in the forefront of wireless technology. What Sprint and Clearwire have is an abundance of Spectrum, which was lacking at T Mobile. In fact Sprint's spectrum holdings can be argued to be better than that of its larger peers Verizon and ATT.

    Once Sprint's 800 Mhz spectrum is transfered from its iDen network it can be deployed in denser areas requiring greater penetration of concrete walls. Part of Sprint's network vision entails being technology agnostic and using bimodal 4G chips, such as WiMax and LTE.

    Since WiMax and LTE are 85% similar technologies upgrading from one to the other would entail little in capital expenditures. Intel has already devoloped the technology to do so. Beceem and Sequans both 4G chip manufacturers have facilitated 4G chips that are bimodal, using WiMax and LTE. Owing to this roaming from disparate platforms should be smooth and without much latency.

    Sprint IMHO was extremely lucky to have been shunned by T Mobile in a possible merger. I just couldn't see any of the advantages. It wasn't as though TMobile had similar network technologies nor was TMo's spectrum holdings worth the price TMo wanted to exact to consummate the deal.

    If Sprint can continue expanding its 4G platform with Clearwire and incorporate LTE and WiMax in tandem with one another, while enhancing their line up of leading edge smartphones they won't need to merge with anyone. In fact their current line up of phones and impending devices is so impressive that the thought of Apple coming to Sprint is no longer a game changing event.

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