Telecom & Wireless
Clearwire Might Not Want To Trust Sprint (CLWR, S, GOOG, INTC, BBY)
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ClearWire Corp. (NASDAQ: CLWR) saw shares rise some 23% on Tuesday because of reports that newly-named Sprint Nextel (NYSE: S) CEO Dan Hesse has revived serious discussions with Clearwire. This would be a huge win for Clearwire if it is announced, but the WiMAX operator may have at least some trepidation and concern even if a deal is signed.
What is interesting is that the deal may have outside funding from Google (NASDAQ: GOOG), Intel Corp. (NASDAQ: INTC), and even Best Buy Co. (NYSE: BBY). This may happen and it may not, but even if the deal is revived we would be more than careful in trusting the deal to go smoothly. These two have been down this road before, only to see Sprint have to cancel the deal after its old CEO left.
Clearwire should treat Sprint as though it is the one in more of a dire situation based upon the company’s recent performance. We will concede that this may not be material because Clearwire has also been hurt and the notion that "beggars can’t be choosers" sure comes to min.
We have also noted that there is an outside chance that Sprint Nextel could be a potential acquisition or merger candidate now that it has been beaten so harshly as a stock. This is actually another risk in that an acquirer or merger partner might not want to be on the cap-ex hook for this build-out, and it may even make the financial situation at Sprint Nextel be less attractive to a buyer if the company has to fund too much of this would-be venture.
Wireless web access has been available nationwide for some time. But 3G in the U.S. is really about as effective as 1.5G compared to much of the 3G available in parts of Europe and parts of Asia. WiMAX is the answer and this new FCC auction will be a key factor there. As large as the U.S. is, doing a WiMAX buildout isn’t cheap. Not in the slightest. That is why having the right business partner is key. Clearwire certainly may have reason to be cautious in betting its entire future with Sprint.
Jon C. Ogg
January 30, 2008
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