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Sprint (and Softbank) at a New Crossroads

Sprint has struggled to convert networks from a mix of CDMA and proprietary Nextel iDen technology to LTE, a task complicated by the lack of greenfield (unused) spectrum to transition users into the competitive 4G+ networks.  The result has been a transition fraught with 'rip and replace' disruption.  This leads to a competitive problem: as current customers contract end, a decision presents itself, "Do I stay with Sprint or do I try T-mobile, Verizon or AT&T?"  This is not simply a problem of upgrading network performance but of winning back jilted customers.


Every seasoned businessman understands implicitly that it is easier and cheaper to keep a customer than it is to win them back, a cardinal rule of business.  The relationship with customers has become more important and less fungible as the US market has matured, sending churn rates among all major operators to lower than 2%.  Sprint is at a crossroads at which it has made marked improvements in network performance.  Unfortunately, this comes at a difficult competitive juncture: the market has reached close to basic saturation.  The growth is occurring in multiple device subscriptions to existing subscribers rather than gains in new customers coming into the market.  


What will Sprint report in subscriber gains/losses and sales and earnings figures?

Read more: Sprint (and Softbank) at a New Crossroads

FCC Approves Softbank Acquisition of Sprint and Clearwire

FCC Clears Softbank-Sprint Merger to Push 4G LTE-Advanced

 tiered LTE spectrum

A compeling vision to form a 'world class' company: Softbank's network development strategy looks much like Sprint's 'Network Vision'.  Softbank is perhaps the world's leader in use of a tiered network approach: Lower frequency bands operating 3G or LTE to deliver wide coverage. Mid frequency bands that make use of microcell scale base stations to deliver higher density bandwidth while achieving fair coverage, the use of LTE picocells in 2.6GHz, 3.5GHz bands to achieve denser and more extensible bandwidth, and, finally, the use of WiFi to achieve the highest level of subscriber bandwidth at shorter range.


AFCC approval comes with no new rules or spin-outs of spectrum.  Clearwire spectrum licenses and lease agreements are cleared to be transferred into the newly formed Sprint Corporation upon approval of Clearwire shareholders, which now appears certain (needing 75% approval, approx. 78% of overall shares are committed). The FCC agreed with Sprint's assertion that the 2.6GHz EBS-BRS spectrum had gone through a screening process in 2008 when New Clearwire was formed. Sprint held ~51% de facto control at that time, thus the assignment remains basically as is.

BDISH, Crest, Verizon, disapproving EBS license holders/groups, and other objections were either rejected, considered moot, or to be unsuited for this determination.  FCC ruled that National security, foreign ownership, jobs creation, 800MHz, EBS-BRS spectrum concerns were either answered or were topics being considered elsewhere and not subject to this determination.

CThe merger of Softbank, Sprint and Clearwire was approved as being pro-competitive, in keeping with Sprint and Clearwire corporate governance and state and federal laws, expeditious, and agreed to by the parties.

Read more: FCC Approves Softbank Acquisition of Sprint and...

Prediction: The FCC Will Approve Softbank Acquisition of Sprint & Clearwire


We Confirm the Prior Prediction the FCC and DOJ Will Approve Softbank's Acquisition of Sprint and Roll-up of Clearwire


Softbank's acquisition of financially strapped and competitively challenged Sprint has made good sense for the industry and the public in our opinion.  IN fact, we encouraged consideration of Softbank starting two years ago as it became apparent that Sprint reforms under Hesse would come up short in raising the company to the next level of competition without outside funding.  Softbank has offered critical lead in experience and technologies used in small cell HetNet approach to deployments, mobile video services and devices,  2.6GHz IMT-Extension band, and accompanying web and cloud services that add to their attractiveness as a suitor.


The FCC had earlier signaled that no obstacles have stood in the way.  Julius Genachowskii, former FCC Chairman, had said over four weeks ago that consideration of the acquisition and roll up of the Clearwire spectrum into New Sprint was occurring on schedule without issues likely to cause it to become derailed.  Long before that, rationale had lined up for the approval.  The burnt of this rationale is 1) Sprint is in dire need of being bolstered in order to compete on a higher level playing field going forward, and 2) the industry at large needs for the 2nd, Sprint, and 3rd, T-Mobile, mobile/ICT competitors to become more balanced in competition with Verizon and AT&T.



Here are a few further predictions of the FCC decision:


aThere will be no major spectrum carve-outs of the combined Sprint-Clearwire spectrum. 

bThe FCC will issue minor rulings on access to the 2.6GHz EGS-BRS spectrum to encourage wholesale access and data roaming.

cThe approval will strengthen Sprint's bid to acquire Clearwire by clearing the way for capital commitments regardless of the shareholder approval.



Read more: Prediction: The FCC Will Approve Softbank...

DISH's Latest Ploy: Man Overboard!


The Latest Bid by DISH to Entice Sprint-Softbank Into a Deal


Charlie Ergen's latest attempt to break into the mobile broadband space through acquisition has shifted focus back again to Clearwire as efforts to court Sprint away from Softbank appears beyond DISH's grasp.  The past attempt to acquire Clearwire, a bid at $3.40, while 'superior' in dollar terms, fell far short in financial structure, time-to-market impacts, regulatory concerns, and product and technology synergies that have made it a less desirable alternative.  From the typical perspective of merger and acquisition analysis financial analysis, the first offer had, on its face, a value higher than Sprint's $2.90 acquisition price.  However, neither the earlier offer or the increased bit at $4.40 comes close to compensating Sprint for their long sought after position as the developer of the 2.5-2.6GHz broadband extension band spectrum or leadership position in mobile marketshare. 


A basic question needs to be asked: "What is DISH's Ergen trying to acquire in order to build a successful new business model?" Charlie has repeatedly answered that question himself, saying DISH needs a network and mobile device partner as well as a well placed mix of spectrum.  DISH needs to graft on mobile marketshare or find ways to build up to it cost effectively or the business model will face a similar fate as Clearwire - drowning in the sea of competition for combined mobile and broadband services.

 ComeCloser man overboard4

 Come Closer, I'll Throw Your Boat a Lifeline! Source: Maravedis Group 2013  

Read more: DISH's Latest Ploy: Man Overboard!

Deal Flow Time: "The Time to Jump is When Everyone Else Does"

muliple media network conversion - A Clash of Different Titans


Timing is Everything:  The advent of 'seats to the streets' connectivity that includes triple and quadruple-play services was anticipated since before the first 3G data networks and devices were deployed.  The current deal flow is on schedule with forecast developments for late 2012 into 2013 Further consolidation is expected.


Last July, we predicted a new wave of consolidation would take place to engulf Clearwire and the use of its 2.6GHz band 41 spectrum. The rationale was that the spectrum would come into play as LTE-Advanced TD-LTE networks and devices, including the Apple iPhone and Samsung Galaxy lines, became available.  The timing for TD-LTE chips from Qualcomm, Samsung, commercial scale  network deployments and device availability had been firming up the long-term forecasts needed to support the needed growth in use of the spectrum. Cost synergies with common developments in China, Indonesia and other population rich markets are helping to fuel interest in the spectrum were expected to emerge as well.  That was expected to focus more attention on Clearwire and the spectrum.


Our expectations for consolidation focused on the financially strapped and future limited operators including metroPCS, Clearwire, with T-Mobile not considered an immediate target for being acquired since they had recently received additional spectrum and capital from the AT&T breakup. Clearwire was postulated to be eventually acquired by Sprint, however, we anticipated it staying independent through the early stage of TD-LTE introduction due to Sprint's desire to spread costs of 2.6GHz network development among Clearwire wholesale customers. That projection was upset by the subsequent take-out offer by Sprint for the remaining 49% of the company following their agreement to sell 70% of the company to Softbank.  


While the exact timing and details of acquisitions have been difficult to forecast, the climate that precipitated the current spate of deals was relatively easy to surmise.  Once the major trends are able to be substantiated by solid data, forecasting of interest in the spectrum becomes more a matter of timing. The deals are precipitated due to the timing of markets and technology that makes for shifts in product offerings and underlying use of spectrum.  Simply put, acquisitions become more likely as companies figure it has become time to move or face missing out on windows of opportunity.  Companies also face the threats of new competition as their current markets come under pressure from the shifts of incumbents and new market entries. 



Coming up:  1) Forecasts for DISH, Sprint, Softbank, and Clearwire slate of deals. 2) An outline for success of DISH TV Everywhere