Posts Tagged ‘Clearwire’

More Industry Consolidation Coming

Thursday, July 25th, 2013
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AT&T’s bid to buy Leap Wireless, just after SoftBank bought Sprint, and Sprint bought Clearwire, is one sign of potential new consolidation of the U.S. communications and video entertainment markets.

In Europe, Telefonica’s purchase of E-Plus, if approved, would shrink the German market from four leading suppliers to three. If EU regulators approve that deal, most observers expect an upsurge of mergers in the EU market.

In the United Kingdom, Liberty Global has purchased Virgin Media.

In the U.S. cable industry, Liberty Media is talking about eventual consolidation in the U.S. cable business to two leading providers, Comcast and one other entity.

The European Union is pushing to create a single EU telecom market, followed by massive consolidation in the EU telecom business, something service providers have been calling for, and which regulators at the EC seem to agree is needed.

The notion of consolidation leading to a single satellite TV provider, two leading cable companies and eventually, only three national wireless suppliers is in fact possibly too conservative.

In the end, there might be no independent U.S. satellite video business, nor three U.S. mobile service providers, even though there could be regulatory issues.

AT&T’s purchase of Leap Wireless probably will not draw opposition from the Federal Communications Commission, since U.S. market structure would not change. The Leap Wireless assets would not change the market share positions of the top four mobile providers, nor dramatically add subscriber heft for AT&T.

But there has been prior consolidation in most all other U.S. telecom segments as well, including prior rounds of consolidation of mobile, cable, competitive local exchange carriers and long distance providers.

The need for scale, especially when industry segments mature, drove the earlier waves of consolidation. But competition


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Clearwire Bought by Sprint

Monday, December 17th, 2012
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Sprint Nextel Corp. has acquired the remainder of Clearwire Corp. it did not currently own for $2.97 a share.

Clearwire’s board of directors has approved the deal, and Sprint has gotten commitments from Comcast, Intel Corp. and Bright House Networks in support of the deal, as well.

The $2.2 billion purchase values Clearwire at $10 billion, including net debt and spectrum lease obligations of $5.5 billion.

The deal removes one national mobile service provider from the U.S. market, and gives Sprint the full management control of Clearwire it will need if, as expected, Sprint launches some sort of new attack on industry pricing and packaging, something Softbank has indicated it will do in the U.S. market, as it has done in the Japanese market.

Data services are likely to be the focal point for any such effort, for obvious reasons. Voice and messaging services are a declining source of revenue for most providers, and Softbank attacked the Japanese market by disrupting data service plans. Softbank Japan already earns perhaps 66 percent of its revenue from data services.

Softbank does not view the U.S. market as saturated, in that respect. Aside from rapidly growing data service revenues, there is the possibility of enticing consumers to buy subscriptions for tablets and other devices.

That is the thinking behind claims that mobile data penetration of three hundred to five hundred percent is conceivable, a claim Verizon Wireless itself made years ago, referring to machine-to-machine services as an example.

In 2006, when Softbank decided to buy Vodafone KK assets, it likewise was criticized in some quarters for undertaking a risky gambit.

Some will argue Softbank is taking another huge risk by entering a country where iit has no previous operating experience, and by assuming a huge new debt load, after only recently shedding a similar debt load.

Softbank argues it is a reasonable risk, and that its prior experience taking on NTT Docomo and KDDI show it can compete in a market dominated by larger service providers.

Softbank, many believe, will use the same strategy it used in Japan, which some would describe as providing a large number of complementary features or services to create a “sticky” relationship with the end user.

Others will point to the pricing strategy. In Japan, Softbank’s 2006 acquisition of the Vodafone unit was not universally considered wise.

But in just one year, Softbank managed to boost its subscriber base from 700,000 in fiscal 2006 to 2.7 million. By the beginning of 2008, Softbank had grabbed 44 percent of Japan’s new mobile subscribers, well ahead of KDDI’s 35 percent and NTT-DoCoMo’s 11 percent.

Some think Softbank will be willing to launch a price war in the U.S. market, as well. that has potential implications for the structure of the U.S. mobile market. “Could Sprint displace one or more of the other leading providers?” is the biggest question.


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Sprint Takes Control of Clearwire

Thursday, October 18th, 2012
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Sprint Nextel Corp. will gain control of Clearwire Corp. without an acquisition, the Wall Street Journal predicted, and so it has happened.

Sprint will pay Eagle River Holdings LLC, the investment firm owned by Craig McCaw, about $100 million for 30.9 million of Clearwire’s Class A shares, or 4.5 percent of the total, and 2.73 million of its Class B stock, according to a regulatory filling today. McCaw, who co-founded Clearwire, retired as chairman of the company two years ago.

Sprint, which already held 48 percent of Clearwire, thereby would own fully 52.5 percent of the class A shares.

By doing so, Sprint will gain control of Clearwire without having to acquire all of the company, much as Japan’s SoftBank will take control of Sprint without buying all of Sprint.

You might say that ends any immediate speculation about any potential Clearwire acquisition by a rival, with a whimper, not a bang. Spring, which has had a contentious relationship with Clearwire, had not been viewed as having a terribly great interest in buying full control.

But those motivations seem to have changed with the change of control to SoftBank, which might have lots of good reasons to want full control of Clearwire, in addition to Sprint. Control of Clearwire spectrum probably is the biggest concern.

Clearwire owns the single greatest amount of spectrum in the U.S. market


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