FCC Clears Softbank-Sprint Merger to Push 4G LTE-Advanced
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.
The FCC order discusses the many objections from DISH, Crest, Verizon and others, and effectively shot them all down based on Sprint-SB being poised to make substantial investments into Clearwire's spectrum and that Sprint has held majority ownership control including rights under the equity holders and other governance agreements.
The rationale given by the FCC is what was expected: the view is that the acquisition is 'pro-competitive', legal, and less speculative or conditional than any other option and is within the rights of the parties upon meeting DOJ and other hurdles. The DOJ never raised antitrust issues to a high level of consideration. In fact, long troubling concerns of concentration of marketshare, financial strength, and broadening across sectors into the hands of Verizon and AT&T, compels DOJ and FCC to seek out means to balance the competitive structure in the industry. Due to prior waves of consolidation and failure of efforts to stimulate more vibrant competition among tier 2 and 3 operators, the regulators, Congress and the White House are compelled to pursue policies which allow Sprint and T-Mobile to seek foreign funding, market alliances and other moves that better position them for future competition. concerns The FCC discusses the many objections from DISH, Crest, Verizon and others, and shoots them all down based on Sprint-SB being poised to make substantial investments into CW's spectrum and THE FACT that Sprint has held majority ownership control including rights under the equity holders and other governance agreements. That is important for shareholders to understand: you cannot think existing agreements will be done away with, even if its mighty Charlie Ergen doing the asking. Corporate charters and surrounding agreements are valid under the law until acquired or otherwise transferred or amended under the laws of the state of incorporation and bylaws of the corp.
As suspected earlier, there is some language in the FCC approval about considerations for new rule-making on the 2.6GHz band. The FCC order says is that there are current or expected deliberations under way such that specific new rule making on 800MHz, 2.6GHz, AWS-4 or other spectrum need not be considered under this order. Commissioner Pai had been a hold out among the three commissioners, reportedly seeking assurances. Pai's letter pertaining to the order indicates his wishes were accommodated but gave no specifics. The language in the order that indicates spectrum issues will be taken up in their corresponding deliberations, may be what Pai mentions as part of what he got put into the order. That would be copacetic with ongoing work and understandings taking shape within the FCC and among the major operators. By getting it put into the agreement, its not a 'big deal' but it is notable in that it is mentioned and not left out... its importance is more to other operators who will want to see follow through .. as such, its an issue that is made another of many more or less routine deliberations... which makes it a 'Win' as far as what Sprint-Softbank-Clearwire could have expected. The fact is that 2.6GHz sub-bands will gain in international use and, thus, there needs to be alignment and assurance of long-term license rights to afford roaming access. That is something to SB-S-CW's benefit and that they will be working to make happen to at least some extent regardless of pressure from other operators or the FCC because they want to build traffic.
We do not see any 'gotchas' in the order for Sprint, Softbank, or Clearwire nor does it pose unexpected changes to competitors or license holders.
The FCC ruling does provide an update on some policy issues:
EBS license holders are primarily responsible to achieve use of their spectrum . New Sprint Corporation as lease rigts holder has commercial interests but is hot held as responsible under the licenses.
The FCC and DOJ confirm interest in balancing competition between VZW and AT&T and weaker market participants.
Sprint, T-Mobile and the rest of the field under them may take this as an encouraging sign of the FCC's disposition heading into the 600MHz incentive auctions and other contests.
Along with specific rulings, FCC encourages innovations in small cells and devices.
Softbank is the world leader in SDWN, Smart Distributed WBB Network, and in Cloud Base Stations facilitate by fiber-optic connections to eNodeB LTE small cell units.
Time to Jump Up to a Higher Level of Competition in Networks Devices, & ServicesThe combination of Sprint, Clearwire and Softbank is moving to take advantage of Softbank's lead in SDWN and Cloud base station technologies, as well as device supply, operations and marketing synergies according to the companies. The race to build networks and field devices is an ever-present facit of the industry. We think the new amalgamation will move rapidly to take advantage of Softbank's proven small cell and smart network skills to accelerate and improve upon prior Sprint-CW efforts. Sprint faces tough competition in Verizon and AT&T, however, its possible to pull ahead in the advancement of their network relative to competition... even though coverage will lag for some time.