CLWR - Clearwire

[Cardboard]

The horizon gets clearer and clearer by the day on S and CLWR. I would expect an LTE conversion and spectrum sharing deal in the not too distant future.

 

http://www.fiercewireless.com/story/clearwire-coo-sees-lte-switch-horizon-details-cloudy/2011-05-20

 

Cardboard

[brker_guy]

bmichaud, I think that CardBoard answered the question for you.  I don't think Clearwire will be unwised to go with a technology that would not give it interoperability and worldwide roaming capability.  So, eventually, they will be looking at putting up some LTE radios and antennas to transition their customers to LTE.

 

I don't know if I posted this link before, but this link is worth reading:

 

http://www.wirelesse2e.com/index.php/2011/03/21/iphone-is-the-culprit-behind-atts-purchase-of-t-mobile/

[bmichaud]

I don't get it....

 

Sprint CFO is talking down further funding of CLWR (http://www.fiercewireless.com/story/sprint-cfo-remains-noncommittal-clearwire-funding-hints-lte/2011-05-24), yet on page 12 of the attached analyst call, Hesse says, "...So when you see Sprint 4G, we're actually using the Clearwire 4G network." Am I missing something? Does Sprint not need Clearwire?

 

And the apparent alternative to using CLWR for building out an LTE 4G network is Network Vision (http://newsroom.sprint.com/news/sprint-announces-network-vision-network-evolution-plan.htm), yet Network Vision is going to take three to five years. Yes Network Vision is going to help enormously from an efficiency standpoint, but from a competitive standpoint, why would Sprint not pay the roughly $1bn needed to fill-out CLWR's existing network and the roughly $500MM to outfit the network with LTE technology in the NEXT TWELVE MONTHS, versus waiting three to five years.

 

....

[txlaw]

Did you guys see this story?

 

http://www.bloomberg.com/news/2011-05-25/clearwire-investor-pardus-demands-spectrum-sale-since-it-would-boost-stock.html

 

 

[S2S]

The very well-written letter can be found in its entirety at:

http://www.virtual-strategy.com/2011/05/25/pardus-capital-management-releases-letter-sent-clearwire-chairman-and-board

 

The paragraphs quoted below sums things up nicely.

 

And here’s the real conflict. Clearwire is critical to Sprint. Its best customers are on your network. It has no 4G offering without Clearwire. Yet Sprint does not need or want Clearwire to trade to $15 or $20 per share. Sprint believes its best play is to keep Clearwire depressed in value and cash-starved, which leaves Clearwire vulnerable to a cheap take-under. We happen to think this is not smart for Sprint: it delays the 4G rollout and means Sprint is likely to have to fund the network build one way or the other. We also believe the real negotiating leverage should work the opposite way: Clearwire has other strategic options; Sprint has no realistic replacement for your network and spectrum. Further, while Clearwire has apparently narrowed its options, Sprint has been on a PR roll about network hosting deals with other potential spectrum partners, like Lightsquared.

 

Whatever the negotiations are behind the scenes, Sprint has positioned Clearwire as the needy partner. Recent stock sales by other strategic investors only add to the pressure on the stock and reinforce that view. We are increasingly concerned that the economics in a network hosting deal would not favor Clearwire. We are also concerned that Sprint may attempt to structure the deal in such a way as to make Clearwire unattractive to other potential partners (e.g., Sprint simply leases the spectrum on an exclusive basis without subscriber or usage-based economics). This would effectively give Sprint an exclusive on a take-under of Clearwire in the future.

 

Sell-side analysts are coming to the view that Sprint holds the key to wholesale deals in the U.S. (see, e.g., Goldman Sachs, United Sates: Communications Services, May 17, 2011, “Sprint now in prime position as go-to wholesale partner.”). We find this view deeply troubling, because the large spectrum wholesale business is Clearwire’s business model, and the opportunities presented by spectrum shortages should benefit Clearwire, not Sprint.

 

The talk (on the Street) these days is that Sprint and Lightsquare are near an infrastructure sharing deal, through which Lightsquare will be able to build out a nationwide LTE network (and thus fulfill its agreement with the Feds) much cheaper than going at it alone, while Sprint gets paid for doing very little (installing a few antennas on Network-Vision'ed towers), gains access to Lightsquare's LTE spectrum and more leverage in negotiation with Clearwire.

 

I read that Clearwire is still in the initial stage of testing WiMax / LTE switch towers, which suggests that (a) we're still in uncharted water concerning the technologies involved, particularly when there're so many unanswered questions on the 2.5GHz spectrum and (b) there is a risk that a full-scale conversion would take too long (case in point: iDEN).

[Myth465]

Seems like great minds think alike  ;D.

 

I cant value these assets and am not a techie, but if a third party pays up I will buy shares at a 50% - 75% discount to that implied IV. It makes sense. Sell 5% so normal folks can value the company.......

[txlaw]

Seems like great minds think alike  ;D.

 

I cant value these assets and am not a techie, but if a third party pays up I will buy shares at a 50% - 75% discount to that implied IV. It makes sense. Sell 5% so normal folks can value the company.......

 

Almost sounds like the type of actions an SD or CHK would take, don't it?

[Myth465]

Ya I think its even worse because so few people would really understand the potential and know how to value these things. Hell I dont, I missed the ball on LVLT which is much easier to understand. Plenty of oil and gas analysts but how many people walking around can tell you the NPV of Spectrum. How many people know what the hell spectrum is. I agree with the writer, if things are as they seem Clearwire has Sprint by the balls.

 

Sprint is screwed if that AT&T merger goes through. The FCC will not allow them to be bought at that point inmo. They would have to roll up whatever is left and try to compete......

[S2S]

I agree with the writer, if things are as they seem Clearwire has Sprint by the balls.

 

Except an equally good case can be made that it's the other way around. Hence the massive pullback in CLWR.

 

 

I'm not sure there will be much demand if CLWR only put, say, 10% of its spectrum holdings rather than the whole shebang on the block. There are very few buyers (each suffers from its own constraints), significant time/resources required to make full use of the assets, and, importantly, the 2.5 GHz spectrum is like kryptonite, to everyone but CLWR.  ;D

[Myth465]

I agree with the writer, if things are as they seem Clearwire has Sprint by the balls.

 

Except an equally good case can be made that it's the other way around. Hence the massive pullback in CLWR.

 

 

I'm not sure there will be much demand if CLWR only put, say, 10% of its spectrum holdings rather than the whole shebang on the block. There are very few buyers (each suffers from its own constraints), significant time/resources required to make full use of the assets, and, importantly, the 2.5 GHz spectrum is like kryptonite, to everyone but CLWR.  ;D

 

Good points. 2 things are for sure.

 

As much as I know, I dont know much.

This is staying in the too hard pile for now.

 

You cant win em all......

[bmichaud]

I think at these levels you receive a margin of safety against 1)not be able to precisely value the spectrum,and 2) Sprint not working with CLWR to build out the 4G network/not providing further funding. The way I look at it is - 50% chance of a 50% loss due to a very negative event (obviously a 0 is a possibility but I don't think that would happen at once), and a 50% chance of a double for an expected return of 25%. Or put another way, risk 50% on the downside for 100% or more on the upside. Not bad for buying an asset in a secular updraft, that is needed by Sprint, and has a decent chance of a firesale value not far from the current price.

[brker_guy]

For all of you who really think and believe that LightSquared will be a big threat to CLWR's wholesale business, you might like to follow this development:

 

http://www.gpsworld.com/gnss-system/lightsquared-las-vegas-test-towers-flawed-fcc-filing-shows-11679?utm_source=GPS&utm_medium=email&utm_campaign=GNSS-Design_05_26_2011&utm_content=lightsquared-las-vegas-test-towers-flawed-fcc-filing-shows-11679

[bmichaud]

Great article.

 

Also - I keep going back to the amount of time it will take for Sprint to implement non-CLWR plans. This article from Feb highlights the potential network sharing agreement between LS and S, http://news.businessweek.com/article.asp?documentKey=1376-LH2OW407SXKX01-22M63FLRM049ATECQB3OL6S7CS, yet it still would take several years. Again, just rank conformation bias, but CLWR is ready to move ahead with 4G right NOW.

[bmichaud]

I'm sorry, I meant to say ready to move ahead with 4G LTE

[S2S]

but CLWR is ready to move ahead with 4G right NOW.

 

Is it? My understanding is that CLWR is in the very early stages of testing cell sites capable of handling both LTE and WiMax. What's past is prologue, transitioning both the network and the end devices from one standard to another has never been a smooth process.

 

Perhaps more importantly, CLWR lacks the financial means. They'll run out of cash at YE, and once/if additional (equity) financing is arranged, it seems like management's priority is (1) expand coverage from 130M POP, only then (2) move to LTE.

[bmichaud]

"Is it? My understanding is that CLWR is in the very early stages of testing cell sites capable of handling both LTE and WiMax. What's past is prologue, transitioning both the network and the end devices from one standard to another has never been a smooth process.

 

"Perhaps more importantly, CLWR lacks the financial means. They'll run out of cash at YE, and once/if additional (equity) financing is arranged, it seems like management's priority is (1) expand coverage from 130M POP, only then (2) move to LTE."

 

 

My only point is that CLWR has the network in place (with some "filling in" remaining, which would cost around $1B) ready to test/outfit LTE etc...while Lightsquared does not yet have the network in place. LS could speed up the process via a network sharing agreement with Sprint, but not until Sprint has implemented Network Vision, which will take several years.

[brker_guy]

I think you guys might want to pay attention this:

 

http://www.technologyreview.com/communications/37608/?ref=rss&a=f

[bmichaud]

Fascinating. Further evidence of the momentum in place behind wireless data demand. I LIKE it.

[bmichaud]

Two good updated notes on CLWR. The Zach report cracks me up - it's a mess the way it's put together, but it's filled with good information.

[Cardboard]

"TV spectrum signals have a longer wavelength than Wi-Fi or cellular signals, which means TV spectrum can support longer-range data connections."

 

Isn't this a problem with data hogging devices? These are low frequency airwaves which are great to penetrate buildings and to go long distance as mentioned, but on the other hand less capable to carry heavy loads of data.

 

Cardboard

[beerbaron]

"TV spectrum signals have a longer wavelength than Wi-Fi or cellular signals, which means TV spectrum can support longer-range data connections."

 

Isn't this a problem with data hogging devices? These are low frequency airwaves which are great to penetrate buildings and to go long distance as mentioned, but on the other hand less capable to carry heavy loads of data.

 

Cardboard

 

The amount of data that can be transported has nothing to do with it's frequency, but rather the bandwidth. For example Hi-Def TV channels in the 70-76Mhz range are not of lower quality then the ones in the 600-606 MHz range.

 

The amount of data that can be transported in a fixed band depends on three things. The signal to noise ratio, the modulation and the compression. I'm not actively developing any wireless devices right now but my guess is that we have reached pretty much our maximum on all 3 aspects of cell phones. So the only way to increase data is to increase the bandwidth.

 

Regards

BeerBaron

 

 

[bmichaud]

http://www.forexyard.com/en/news/LightSquared-near-2bln-a-year-Sprint-deal-sources-2011-06-01T165121Z

 

Not that this is anything new, but would be an interesting way for Sprint to fund its Network Vision project. I had previously stated that Sprint would need to finish Network Vision before Lightsquared implemented a 4G LTE network, but now I'm not so sure...Though this deal could strictly be to fund Network Vision (as stated in the link) and not include a wholesale agreement...

 

Based on research and talking to analysts covering CLWR, I don't understand how a deal with LS is a quicker way to 4G LTE than with CLWR given that CLWR's 4G network IS Sprint's 4G network.

 

Thoughts?

 

 

[Cardboard]

I think it is just renting space on Sprint's network. There is a huge cost saving for LightSquared to do so vs building its entire network from scratch. It is a win-win for both. The only hiccup is that if LightSquared fails, Sprint will be stuck paying higher collocation fees to American Tower and others. First thing is to get the go ahead by the FCC after June 15 and that is far from certain looking at some of the players involved:

 

http://www.bloomberg.com/news/2011-06-01/deere-says-falcone-s-lightsquared-to-cause-massive-interference-.html?cmpid=yhoo

 

There is also a rumour of a deal with AT&T in this article.

 

Clearwire will also need to do something similar to extend past its current coverage. It just seems too expensive and inappropriate to continue building the WiMax network towards national coverage when you know it is not going to be the standard technology. Then IMO, Sprint and Clearwire will announce some combined LTE plan. Who knows? LightSquared might even be part of it.

 

You also have to factor in some concessions by AT&T to get their T-Mobile merger approved since based on what I have read so far, it looks like a No Go. The biggest opposing voice being Sprint, I think it is fair to expect a really nice "package" to shut up Sprint and show regulators that competition will remain alive and well. AT&T has too much to lose in this deal to just wait and see for a decision in over a year from now. They need to be proactive.

 

Sprint has mentioned that they will disclose more mid-year on their 4G plan. It is getting very close and I would expect a lot of clarity coming out of it for all the players involved and potentially involving AT&T.

 

Cardboard

[brker_guy]

Cardboard,  I have posted some of my comments regarding the rumor about the AT&T and the LS possible deal on the LVLT thread.  So, I will cut and paste some of it here for you guys:

 

It appears to me that they are now getting to move onto the Plan B to launch their services.  I think the Bloomberg article is just pure speculation.  To me, I just think that it's crazy of them to align themselves with AT&T and be AT&T's MVNO:

 

http://en.wikipedia.org/wiki/MVNO

 

Let's look at some logic of such a deal to occur.  AT&T's not even close to having LTE services.  They will continue to be their former self by cutting corners to screw the public with the real LTE services just like they did with the U-Verse services by rolling out HSPA+ instead, and they will call that as the 4G services.  Furthermore, a lot of this 4G network will come from the result of the T-Mobile merger if it ever gets approved.  Furthermore, once the merger closes(if it ever closes), T-Rex would be more focus on servicing its customers more than helping a vendor like LightSquared to launch its service due to capacity issue.  Supporting 130+mil subs is not going to be an easy task for T-Rex.  I think CLWR and S would be far better as MVNO partner to LightSquared than T-Rex.  My guess is that this is some analysts' way of pumping T-Rex on a down day.

[bmichaud]

Interesting piece on LTE and WIMAX

 

http://www.fiercewireless.com/story/paolini-planning-transition-wimax-lte-role-dual-mode-devices/2011-06-02

 

As an aside, interesting to note Imagine out of Ireland employs 3.5 GHz spectrum and is considering an LTE network - its spectrum must be worthless though since it's not in the 700 MHz range....