The Federal Communications Commission (FCC) has approved the acquisition and merger of Sprint Nextel and Clearwire by Japan’s SoftBank Corporation. For its $21.6 billion, SoftBank gets about three-fourths of Sprint and supports Sprint’s acquisition of Clearwire. This action, in effect, solidifies Sprint’s position as the third largest U.S. cellular services provider.
The two leading providers, of course, are AT&T and Verizon. Both are nearly equal in number of subscribers and together hold well over half the cellular business market share in the U.S. The fourth largest service provider is T-Mobile, which recently acquired number five, MetroPCS.
Sprint and Clearwire should do well given their ownership of significant chunks of prime wireless spectrum. The combination controls 150 MHz of spectrum near 2.5 GHz, a prime location for cell phones. Sprint is currently rolling out its LTE service nationwide. Clearwire has also been a major supplier of rural broadband wireless services with its WiMAX network. Both Sprint and Clearwire are now on the LTE path for future expansion. Clearwire is adopting the TDD-LTE version of LTE that mirrors SoftBank’s actions in Japan.
While there was some initial angst over foreign ownership of a major U.S. cellular network, the FCC has concluded that there is no problem. In fact, the FCC blessed the merger as a positive sign of increased competition in the field that could ultimately favor the consumer with better services and possibly even lower costs. That remains to be seen, but in general more consumer options are a good thing.
For a while, SoftBank was competing for the Sprint/Clearwire bundle with the satellite TV company Dish Network. Yet the boards and stockholders of Sprint and Clearwire went for the SoftBank deal. Dish is said to be after Leap Wireless, now possibly in competition with T-Mobile. All this acquisition action is directly tied to spectrum ownership, which is the real asset in the wireless wars.
This move should be good for the cellular business. Right now, nothing is hotter than the smart-phone market and all the cool phones, apps, services,and benefits that are attracting consumers. What and how Sprint does will be worth watching.
