Third largest wireless carrier in the U.S. -
) - has been striving to achieve majority control over mobile
virtual network operator (MVNO)
). Recently, the third largest telecom operator of Japan Softbank
entered into an agreement to purchase a 70% stake in Sprint for
about $20.1 billion, which in turn, is believed to have fuelled
Sprint's stake buying decision.
Sprint is attempting to buy out Clearwire owner Craig McCaw's
holding stake in the company. This will place Sprint as a major
owner of the MVNO with a stake of 50.45% up from 48.15% earlier.
The additional 2.3% stake will cost Sprint around $100
However, if the other major shareholders of Clearwire - like
), Bright House Network as well as chipmaker
) - exercise their option of buying some of McCaw's share, then
Sprint's majority stake would stand at 50.02%.
Sprint offers fourth generation (4G) services utilizing the
Worldwide Interoperability for Microwave Access (WiMAX)
technology through a wholesale agreement with Clearwire. As a
part of the agreement Sprint will pay Clearwire $926 million to
use its unlimited WiMAX network and would also make prepayments
of $350 million for LTE capacity, provided Clearwire meets
certain build-out targets by June 2013.
Clearwire is building 4G LTE network using Time Division (TD)
LTE duplex technology in the 2.5 GHz spectrum band - the same
technology that Softbank uses in Japan. This is slated to help
both the companies to improve their handset related
The most attractive proposition from Clearwire is that it has
access to a large chunk of spectrum. On the other hand, it lacks
the financial resources to modernize its network.
We believe that as Sprint now has the financial back up
commitment from Softbank, it will strive for control over
Clearwire. Such a move would give it access to the MVNO's
additional spectrum which will put the third largest U.S. carrier
in a much stronger position as compared to
Verizon Communications Inc.
We maintain our long-term Neutral recommendation on
Sprint-Nextel Corp. The company also retains a Zacks #3 Rank,
implying a short-term Hold rating.
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