Sprint Nextel Corp.
), one of the leading wireless providers in the U.S., is in talks
to buy a 49% stake in
). Presently, Sprint is the biggest shareholder in Clearwire,
owning a 50.8% share. It is reportedly negotiating with the
minority shareholders for a complete takeover.
While there is no official confirmation, markets are buzzing
with rumors of a $3 per share deal for the complete acquisition
of Clearwire. In October, Sprint already brought under its
possession the 4.5% share that Eagle River Holdings LLC held in
Clearwire, which specializes in mobile and fixed wireless
broadband communications, has been providing 4G network services
to Sprint. Now that Sprint is keen on building its own 4G
network, it also aims at upgrading the Clearwire technology to
set a compatible technological
If the deal materializes, gaining full rights over Clearwire
would imply access to its radio frequency spectrum ranging 2.5
GHz, utilized in providing services using 4G 802.16e mobile WiMAX
Besides this deal, Sprint is also trying to forge a
DISH Network Corp.
) that will enable the latter to offer its own mobile services
using Sprint's network. DISH, the second largest satellite TV
operator, is waiting for the FCC nod to launch a nationwide
high-speed wireless broadband network. This will enable the
company to offer mobile Internet, voice and video services to its
customers using its newly acquired satellite airwaves from the
bankrupt DBSD North America Inc. and TerreStar Networks Inc.
The agreement, if cleared, would allow Sprint to access DISH
Network's spectrum, which is the most important and scarce
element in deploying a nationwide super-fast LTE network.
Nevertheless, this deal may need an approval from the Japanese
wireless service provider Softbank, which has decided to purchase
a majority stake in Sprint.
In October, it was reported that Sprint is selling its 70%
stake to Japanese cellphone company Softbank Corp. for $20.1
billion. Sprint is in the midst of a multi-billion dollar
restructuring program known as Network Vision.
Through this plan, the company is concentrating on the core
Sprint platform, which includes CDMA, WiMAX and Long-Term
Evolution (LTE) technologies, and eventual termination of the
Nextel platform (iDEN business). Though the company has enough
liquidity to address the growing costs of network upgrade, iPhone
subsidies, debt maturities and working capital requirements, it
needs to bolster its liquidity position for certain buyouts. The
potential transaction would provide Sprint the financial support
to build and improve its competitive wireless network.
However, the company is also struggling to deal with the loss
of post-paid customers to other industry players such as
Verizon Communications Inc.
). This shrink in subscriber base was primarily due to intense
price competition, ineffective marketing, less favorable network
quality and delay in integration of back-office functions with
its acquired units.
We reaffirm our long-term Neutral recommendation on Sprint.
Currently, the stock has a Zacks #2 Rank implying a short-term
(1-3 months) Buy rating.
CLEARWIRE CORP (CLWR): Free Stock Analysis
DISH NETWORK CP (DISH): Free Stock Analysis
SPRINT NEXTEL (S): Free Stock Analysis Report
AT&T INC (T): Free Stock Analysis Report
VERIZON COMM (VZ): Free Stock Analysis Report
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