CLWR - Clearwire

[txlaw]

But can it really be the L-Squared money that has caused them to act this way?  Sprint knows that that money will dry up if the GPS issue blows up in Falcone's face.

 

They're definitely taking the risk that CLWR goes it alone with non-Sprint partners.  Look, Charlie Ergen owns quite a bit of satellite spectrum that can be used to build out an MSS/ATC network in conjunction with CLWR.  The MSOs are starting to offer citywide broadband service and are, IMO, preparing to offer broadband everywhere by filling in the gaps in their network by buying wholesale 4G.  The CLWR CEO has essentially said that CLWR wants to be the Switzerland of 4G and that they are talking to T-Rex and VZ to provide them additional capacity.  If S is not factoring in that CMCSK, DISH, or T-Rex/VZ could potentially pull the rug out from under them by getting very close to CLWR, then S management are idiots and they should sue Goldman for giving them poor strategic advice. 

 

More likely, CLWR has told S that they will not be a primary wholesale partner for Sprint's 4G service and will not use S as a spectrum hosting platform unless Sprint commits to providing more capital to CLWR than it already has and commits to using CLWR as its primary partner for the 4G service for the long run.  Sprint, I believe, has gambled that the capital markets will assess the situation after their presentation such that Sprint's cost of capital goes down while CLWR's cost of capital goes up, allowing Sprint to raise money and deploy into its CLWR subsidiary such that the dilution is offset by their extracting economics from the CLWR minority investors.  But the market appears to understand that this bluff is stupid because the cost of building out their own network infrastructure alone exceeds the cost of helping CLWR expand its network.

 

Sprint's decision to delay raising capital and make a decision on its long term 4G strategy by partnering with CLWR has cost it dearly because now the capital markets will demand far more from S equity investors.

 

maybe hesse thinks that the version of LTE that clwr is going to offer puts them at a competitive disadvantage vs T and VZ. maybe they can pick him apart with service comparisons if he goes that way?

 

I'm not so sure they will be able to pick S apart based on service comparisons, especially if S/CLWR plans to partner with the MSOs to bring broadband everywhere by utilizing wi-fi and femto cells.  Also, it remains to be seen whether FDD will be far superior to TDD. 

 

If consumers can't tell the difference in QoS, then it won't matter.  And if CLWR were to go with FDD, it will likely cost a lot more to build out the network.

 

So I don't think that's the reason.

[CONeal]

i see a trade developing in clwr. tell me if I'm wrong. Sprint is saying LS is their number 2 choice for 4g. But S has an out if LS can't get regulatory approval by end of year. nothing happens in in DC in November and December and LS is under intense scrutiny right now. it would be a miracle for them to get the approval. this would give S an Out and make CLWR much more valuable as a source for 4g network infrastructure. I see CLWR going up in the news that S gets out of the LS relationship.

 

Yeah, could be a good trade.

 

Burke, I was thinking the same thing when coming across the slide.  I don't see L2 getting approval in that time frame but my concern is if the ATT/TMobile merger.  What if somehow in order to be approved Sprint gets a concession that gives them another out?  If I remember correctly the merger showdown occurs in December.

 

 

[bmichaud]

There are a TON of moving parts with this thing, but the attached spreadsheet is how I am looking at a potential BK situation from a valuation perspective. In summary:

 

Scenario 1: CLWR is bought based on its existing spectrum position (no LTE overlay or additional market expansion). CLWR's 46.5B MHz-POPs are valued at $.19/MHz-POP, less total net liabilities of $5.9B (total liabilities of $5B + working capital need of $300MM + $1.4B capitalized spectrum leases - $800MM cash), yields an equity value of $2.9B or roughly $2.90 per share.

 

Scenario 2: 130MM POP coverage is overlayed with LTE. Assuming 130MM POPs are covered with LTE, I assume covered MHz-POPs of 20.8B would command a 50% higher value than the BK valuation above of $.19/MHz-POP. Covered POPs would be worth $5.9B. Non-covered POPs would then be valued at a BK value of $.19/MHz-POP, for a value of $4.9b. Total spectrum value of $10.8B, less adjusted total net liabilities of $6.5B (add $600MM to overlay with LTE to above total net liabilities), yields an equity value of $4.30 per share.

 

I look at a third scenario in the attached spreadsheet, but won't get into all the details here. I try to come up with a total cost of CLWR's existing covered network, and extrapolate how much it would cost to fill in the remaining POPs and overlay 46.5B MHz-POPs with LTE. I get to a value of $6.39 per share assuming all 46.5B MHz-POPs are valued at $.50 per share. If valued at $.75 per share, the equity value is $18 per share.

 

Feel free to share any thoughts on any of the numbers.

CLWR_BK_Analysis.xls

[bmichaud]

The teamrep poster over on the yahoo clwr thread said the following with regards to the s/clwr situation (teamrep appears to be a credible poster, citing various industry-specific meetings etc... throughout his posts):

 

Its one of her best articles about Clearwire to date... previous ones were in the category of hype... this one takes a slap at Sprint but mostly gets it right.

 

There remains a problem with many folks understanding of how Clearwire's spectrum can be used and how Sprint and Clearwire each want to position themselves and their relationship.. and each of those positions envisions a different way the spectrum should immediately be used.

 

Sprint is under pressure, much of which Clearwire cannot remedy. The real competition, Verizon and AT&T, have come back stronger since Sprint helped recoup loss or subscribers from the losses due to Nextel iDEN defections, customer service problems, and lack of the hottest device environment, the iPhone/iPad. Just when Sprint thought it would be pulling back into amassing the huge positive cash flows that can come from being a competitive mobile service provider, VZW and AT&T are ramping up more competitive LTE networks. Clearwire is not a total fix for that because the spectrum is best suited as wideband metro coverage and because Clearwire and Sprint are at odds over who can play the role of being the wholesale aggregator.

 

Clearwire, on the one hand, wants S to only get wholesale access from them even though there is a mis-match in providing all of Sprints spectrum needs in lower bands. Sprint wants to be the wholesale aggregator, as can be seen from their presentation/slices, but that would require that Clearwire abandon any future goals of partnering and direct sales. Fundamentally, these two have not come to terms because their visions for the future carve out too much similar turf.

 

Clearwire investors seem to be sycophantic as well: They want Sprint to give Clearwire the funds to build out TD-LTE and, implied, not build out LTE in their own spectrum until they make good use of CW's spectrum. They do not want Sprint to partner with anyone else even though financial analysts say S is running out of money, must borrow, and have not fully accounted for the costs of taking on the Apple product commitments.

 

You could take each company separately or combine them into a fictitious entity and the analysis would be the same: Clearwire and Sprint must keep up with the field of competitors in deploying new networks, reducing costs by reducing the number and simplifying network inter-working and common support infrastructure and management and fielding a rapid succession of competitive devices. They must make full use of their networks in order to turn them profitable. Most of all, they individually or combined will need more funding in order to invest in the network upgrades, market device conversions.

 

What would be a favorable chain of events for Clearwire investors is for the company to have additional partners outside of Sprint. The little mouse, needs more little mice or additional big brothers to counter Sprint's dominance in their affairs. They need money because macro-brain-dead deployments without user innovations cost a lot.

 

"Can anybody find me somebody to love?

Each morning I get up I die a little

Can barely stand on my feet

Take a look in the mirror and cry

Lord what you're doing to me

I have spent all my years in believing you

But I just can't get no relief, Lord!

Somebody, somebody

Can anybody find me somebody to love? " - Queen

 

Clearwire needs some love... not fellow idiot web stock board nerds... they need to go out and find somebody with moola to love them building out TD-LTE. Stanton needs to walk the talk... get the partners or knuckle under to Sprint.. love or foregetaboutit ,.. life as the pack mules of 4G-5G.

 

His response was to a post with this article on Forbes: http://www.forbes.com/sites/joanlappin/2011/10/08/my-my-talk-about-a-dysfunctional-family-as-sprint-publicly-beats-its-subsidiary-clearwire/?partner=yahootix

[bmichaud]

There are a TON of moving parts with this thing, but the attached spreadsheet is how I am looking at a potential BK situation from a valuation perspective. In summary:

 

Scenario 1: CLWR is bought based on its existing spectrum position (no LTE overlay or additional market expansion). CLWR's 46.5B MHz-POPs are valued at $.19/MHz-POP, less total net liabilities of $5.9B (total liabilities of $5B + working capital need of $300MM + $1.4B capitalized spectrum leases - $800MM cash), yields an equity value of $2.9B or roughly $2.90 per share.

 

Scenario 2: 130MM POP coverage is overlayed with LTE. Assuming 130MM POPs are covered with LTE, I assume covered MHz-POPs of 20.8B would command a 50% higher value than the BK valuation above of $.19/MHz-POP. Covered POPs would be worth $5.9B. Non-covered POPs would then be valued at a BK value of $.19/MHz-POP, for a value of $4.9b. Total spectrum value of $10.8B, less adjusted total net liabilities of $6.5B (add $600MM to overlay with LTE to above total net liabilities), yields an equity value of $4.30 per share.

 

I look at a third scenario in the attached spreadsheet, but won't get into all the details here. I try to come up with a total cost of CLWR's existing covered network, and extrapolate how much it would cost to fill in the remaining POPs and overlay 46.5B MHz-POPs with LTE. I get to a value of $6.39 per share assuming all 46.5B MHz-POPs are valued at $.50 per share. If valued at $.75 per share, the equity value is $18 per share.

 

Feel free to share any thoughts on any of the numbers.

 

I would say in a bk if equity came away with anything it would be a positive. however, I really wish clwr could sell some spectrum to at least answer the question that somebody else out there is willing to bet on that particular band of spectrum with real money. I believe Mr Ergen would get involved here. Liberty Media as a possible wildcard.  I think they were both interested in helping Sirius stay out of Reorg.

 

I agree. If your plan is to overlay 130MM POPs with LTE and not even bother with the remaining population, why not sell off some spectrum? Perhaps DISH could utilize some 2.5GHz spectrum to offload data in rural areas. There's no way Stanton is going to let this network just roll over...even if his investment is relatively small in comparison to his net worth, why not take on the challenge of resurrecting the situation and truly becoming the "switzerland of broadband"?

 

If Sprint could pull their heads out of you-know-where, a Sprint/CLWR/Dish/Spectrum Co./Cable Co./dare I say Lightsquared consortium could forge a killer one-stop-shop LTE network for all forms of data consumption in big cities and rural areas. And to please the LVLT wireline folks, sell off Sprint's wireline business  ;D

[bmichaud]

There are a TON of moving parts with this thing, but the attached spreadsheet is how I am looking at a potential BK situation from a valuation perspective. In summary:

 

Scenario 1: CLWR is bought based on its existing spectrum position (no LTE overlay or additional market expansion). CLWR's 46.5B MHz-POPs are valued at $.19/MHz-POP, less total net liabilities of $5.9B (total liabilities of $5B + working capital need of $300MM + $1.4B capitalized spectrum leases - $800MM cash), yields an equity value of $2.9B or roughly $2.90 per share.

 

Scenario 2: 130MM POP coverage is overlayed with LTE. Assuming 130MM POPs are covered with LTE, I assume covered MHz-POPs of 20.8B would command a 50% higher value than the BK valuation above of $.19/MHz-POP. Covered POPs would be worth $5.9B. Non-covered POPs would then be valued at a BK value of $.19/MHz-POP, for a value of $4.9b. Total spectrum value of $10.8B, less adjusted total net liabilities of $6.5B (add $600MM to overlay with LTE to above total net liabilities), yields an equity value of $4.30 per share.

 

I look at a third scenario in the attached spreadsheet, but won't get into all the details here. I try to come up with a total cost of CLWR's existing covered network, and extrapolate how much it would cost to fill in the remaining POPs and overlay 46.5B MHz-POPs with LTE. I get to a value of $6.39 per share assuming all 46.5B MHz-POPs are valued at $.50 per share. If valued at $.75 per share, the equity value is $18 per share.

 

Feel free to share any thoughts on any of the numbers.

 

I would say in a bk if equity came away with anything it would be a positive. however, I really wish clwr could sell some spectrum to at least answer the question that somebody else out there is willing to bet on that particular band of spectrum with real money. I believe Mr Ergen would get involved here. Liberty Media as a possible wildcard.  I think they were both interested in helping Sirius stay out of Reorg.

 

I agree. If your plan is to overlay 130MM POPs with LTE and not even bother with the remaining population, why not sell off some spectrum? Perhaps DISH could utilize some 2.5GHz spectrum to offload data in rural areas. There's no way Stanton is going to let this network just roll over...even if his investment is relatively small in comparison to his net worth, why not take on the challenge of resurrecting the situation and truly becoming the "switzerland of broadband"?

 

If Sprint could pull their heads out of you-know-where, a Sprint/CLWR/Dish/Spectrum Co./Cable Co./dare I say Lightsquared consortium could forge a killer one-stop-shop LTE network for all forms of data consumption in big cities and rural areas. And to please the LVLT wireline folks, sell off Sprint's wireline business  ;D

 

I would not put your hopes on Stanton. His reputation is intact and his net worth is intact. His life isn't going to change a bit if clwr files. In fact he probably would find a way to participate in a restructuring and secure a lot of upside. Sometimes the best way forward is with a clean slate. Lots of deep pockets invested here, none of whom seem willing to put any more money in. I followed over the years how lvlt pulled every trick in the book to stay of of bk. I don't see clwr doing anything but talk.

 

Do you really think equity holders would hardly get anything? DBSD and TSTR were sold for $.19/MHz-POP and DISH is currently looking for infrastructure to utilize the spectrum. CLWR's spectrum is currently usable, and most importantly it's usable in the major markets and close to LTE. Maybe I'm dreaming, but I don't see why a BK judge could look at recent transactions and approve a value for CLWR below that.

 

If possible, I'd much prefer a debt for equity swap over the current situation as long as it's done above $.19 - interest expense cash burn would be reduced, and the debt overhang would be eliminated, allowing equity markets to look at the underlying long-run value of CLWR's wireless real estate.

[brker_guy]

so far the spectrum they own has not proved very popular.

 

Really, peter_burke_ceo?  Based on what facts would you make this statement?  Do you know the LTE specifications to even come up with this statement?

If you do know the LTE Specs in details, please do share because I'd like to learn from you.  ;)

[txlaw]

Well, I bought some CLWR today. 

 

Very small position for me, but even if there is a reorg and we have to wait a while to realize value, it will be a good learning experience for me.

[brker_guy]

peter_burke_ceo,

 

I was just observing your comments about "so far the spectrum they own has not proved very popular".  So, I am just asking for some facts from you to back up your claim there. 

 

My knowlege in tech is the very reason why I asked that question because even old tech junkie like me can learn a new trick or two.  Just wanting to know what prompted you to say that "the spectrum they own has not proved very popular".  Better yet, do you even know what spectrum CLWR owns?  Then, kindly educate me as to what frequency bands or frequencies bands are being targeted for LTE which CLWR is transitioning to.  I would love to learn from you since you seem to make a very emphatic statement about their spectrum has not proven to be very popular...

 

As for Sprint not working with them, are you sure that is not one of Sprint's ploy to wrestle spectrum out of CLWR for peanuts?  Speaking as a very upset Sprint shareholder, Friday was THE MOST IDIOTIC MOVE I HAVE SEEN Dan Hess ever made.  That is about as IDIOTIC as Falcone at Light Squared wanting to operate an LTE network on the GPS band and then go tell the whole world, "We are not interfering with the GPS systeml; they are interfering with us."

 

So, Peter_Burke_CEO, please educate me on CLWR's spectrum and why it isn't popular for LTE! 

 

[Cardboard]

Probably time to call Clearwire's CEO and to let him know of a solid financier in Toronto called Prem Watsa. Southeastern Asset Management could also be interested.

 

There is no way that this company will be left to die with such assets that are gaining in demand due to a very strong secular trend. This is no Yellow Pages or some newspaper. This story looks like LVLT except that the % to fill the "pipeline" is a magnitude smaller.

 

Cardboard

[Cardboard]

"you educate me on why clwr is at $1 and change. i gave you my reason. you didn't give me yours."

 

Well, your reason Peter Burke is quite weak. The stock trades at $1 and change because of funding issues and the strong link to Sprint. Another situation that looks very similar was ATSG. The company had the most efficient planes, but it traded for a couple of dimes for a while because its main client DHL was shutting down in the U.S., playing hard ball and the company needed cash to pay for its commitments. The stock price appreciation since then is nothing short of amazing.

 

So I would say that the fact the stock trades at $1 and change means nothing as to the quality of the assets. Stay tuned. This story should go through some interesting twists.

 

Cardboard

[brker_guy]

CardBoard,

 

Well said!  I was going to lay it in thick to Mr. Burke, but I will lighten up on my comments to him.  So, Cardboard, your analogy of CLWR being ATSG is very well said. 

 

So, Peter_Burke_CEO, here is why Cardboard has said what he said.  Take a look at this ownership of CLWR. [/img].  See attached.  Now, do you think the cable guys (Brighthouse, Comcast and TWC) are going to sit idle while this mess is unfolding?

 

http://www.forbes.com/sites/joanlappin/2011/10/08/my-my-talk-about-a-dysfunctional-family-as-sprint-publicly-beats-its-subsidiary-clearwire/

 

In my area, Cox has its 3G services via an agreement with Sprint, but Cox is already stating that they are moving to LTE.  Now, do you think they will need Sprint for their LTE services if they have a cheaper alternative out there?  So, the "original owners" you are referring to are these MSOs and Google that will likely come to CLWR's rescue. 

 

Now, regarding your lack-of-fact comments about CLWR's "unpopular" spectrum.  CLWR "have designed our network in the United States to operate primarily on spectrum located within the 2496 to 2690 MHz band, commonly referred to as the 2.5 GHz band, which is designated for Broadband Radio Service,

which we refer to as BRS, and Educational Broadband Service, which we refer to as EBS. Most BRS and EBS licenses are allocated to specific Geographic Service Areas."

 

Why did I put that in quote for you?  That's because it comes directly for CLWR's 10K.

 

Now, if you don't know what this 2.5GHz band is, I HIGHLY SUGGEST you study the last two attachments.  So, before you come up with some comments like you did, make sure you know your facts...

 

 

GVP_-_GSMA_2_6_GHz_Report_-_Final_9Dec09.pdf

ltespectrumwebinarpresentation-110722094653-phpapp02.pdf

[Guest valueInv]

CardBoard,

 

Well said!  I was going to lay it in thick to Mr. Burke, but I will lighten up on my comments to him.  So, Cardboard, your analogy of CLWR being ATSG is very well said. 

 

So, Peter_Burke_CEO, here is why Cardboard has said what he said.  Take a look at this ownership of CLWR. [/img].  See attached.  Now, do you think the cable guys (Brighthouse, Comcast and TWC) are going to sit idle while this mess is unfolding?

 

http://www.forbes.com/sites/joanlappin/2011/10/08/my-my-talk-about-a-dysfunctional-family-as-sprint-publicly-beats-its-subsidiary-clearwire/

 

In my area, Cox has its 3G services via an agreement with Sprint, but Cox is already stating that they are moving to LTE.  Now, do you think they will need Sprint for their LTE services if they have a cheaper alternative out there?  So, the "original owners" you are referring to are these MSOs and Google that will likely come to CLWR's rescue. 

 

Now, regarding your lack-of-fact comments about CLWR's "unpopular" spectrum.  CLWR "have designed our network in the United States to operate primarily on spectrum located within the 2496 to 2690 MHz band, commonly referred to as the 2.5 GHz band, which is designated for Broadband Radio Service,

which we refer to as BRS, and Educational Broadband Service, which we refer to as EBS. Most BRS and EBS licenses are allocated to specific Geographic Service Areas."

 

Why did I put that in quote for you?  That's because it comes directly for CLWR's 10K.

 

Now, if you don't know what this 2.5GHz band is, I HIGHLY SUGGEST you study the last two attachments.  So, before you come up with some comments like you did, make sure you know your facts...

 

okay so this appears to be your new thesis.

 

"In my area, Cox has its 3G services via an agreement with Sprint, but Cox is already stating that they are moving to LTE.  Now, do you think they will need Sprint for their LTE services if they have a cheaper alternative out there?  So, the "original owners" you are referring to are these MSOs and Google that will likely come to CLWR's rescue. "

 

As for the Spectrum. you do a good job of telling me what it is and what band it is. You aren't, however, proving that it is popular with customers. So far Sprint is the only real customer and does not seem inclined to continue working with clwr, instead choosing a "Pariah" over a company it owns nearly 50% of.

 

I wonder how you can assume such a confident air about this with the stock at $1.30 and down over 50% in a matter of days. But maybe you know something we don't. Can't wait to see it play out, since I am long a few shares.

 

I haven't done a lot of research on this but here's my high level understanding on why the spectrum is valuable (The details may not be accurate):

 

The higher bands (like the one Clearwire owns) have poorer propagation characteristics i.e. they don't penetrate buildings very well. So until recently these bands weren't in demand since you had to put up more cell towers. So none of the operators really focused on buying these bands.

 

But these higher bands are more capable at carrying more bandwidth i.e they have high capacity (but low range). That didn't really matter for 3G networks where data traffic is low (when compared to what is expected for 4G). 4G networks like LTE and WiMax make better use of this

capacity and hence, this spectrum becomes more valuable for these networks. LTE's highest efficiency/capacity occurs when deployed over a contiguous 20 Mhz band. It is difficult for operators to find continuous 20 Mhz in the lower bands. Hence, the value of the higher bands increases even more.

 

On the Sprint issue: Sprint may have other reasons to move away from Clearwire. My hunch is that it moved away because Clearwire may have different goals i.e. they may want to be a retail operator vs a wholesale operator. Sprint may think that the path Clearwire is following is unsustainable and not in its best interests.

[brker_guy]

As for the Spectrum. you do a good job of telling me what it is and what band it is. You aren't, however, proving that it is popular with customers. So far Sprint is the only real customer and does not seem inclined to continue working with clwr, instead choosing a "Pariah" over a company it owns nearly 50% of.

I wonder how you can assume such a confident air about this with the stock at $1.30 and down over 50% in a matter of days. But maybe you know something we don't. Can't wait to see it play out, since I am long a few shares

 

Peter_Burke_CEO, let's be clear about something first.  I don't have to prove anything to you.  The facts are all there if you choose to dig in and study.  I am not here to prove anything to you.  Go study up on CLWR's 10K and read their filings.  Just because that Sprint is their only customer, and that customer is moving away you are telling me they are dead?  Please!!!

 

I never assume any such confident as I am down 54% on it, but I am not panicking.  I work in the wireless field long enough to know what is valuable, and what isn't.  SPECTRUM is a finite asset.  So, that's the bet I place on CLWR. 

 

The higher bands (like the one Clearwire owns) have poorer propagation characteristics i.e. they don't penetrate buildings very well. So until recently these bands weren't in demand since you had to put up more cell towers. So none of the operators really focused on buying these bands.

 

But these higher bands are more capable at carrying more bandwidth i.e they have high capacity (but low range). That didn't really matter for 3G networks where data traffic is low (when compared to what is expected for 4G). 4G networks like LTE and WiMax make better use of this

capacity and hence, this spectrum becomes more valuable for these networks. LTE's highest efficiency/capacity occurs when deployed over a contiguous 20 Mhz band. It is difficult for operators to find continuous 20 Mhz in the lower bands. Hence, the value of the higher bands increases even more.

 

ValueInv, your comments are dead on!!!  That's the reason why I think there is still competitive advantage left for CLWR: the Spectrum!

[txlaw]

On the Sprint issue: Sprint may have other reasons to move away from Clearwire. My hunch is that it moved away because Clearwire may have different goals i.e. they may want to be a retail operator vs a wholesale operator. Sprint may think that the path Clearwire is following is unsustainable and not in its best interests.

 

Clearwire has moved away from being a retail operator.  There was some tension between Sprint and Clearwire earlier on because of the retail strategy clash, but that's pretty much over now. 

 

CLWR clearly wants to be a wholesaler of 4G broadband to whoever wants to purchase it -- the Switzerland of 4G.  That could happen if Sprint does not make a move pre-BK, in which case Sprint cannot count on their spectrum hosting service being as valuable as they would like it to be.  If debt gets discharged/converted in BK, CLWR will likely continue on by itself or with other partners (e.g., DISH). 

 

With respect to selling US spectrum assets, it's not so easy to just up and decide to sell spectrum.  It's a highly illiquid asset that is subject to regulatory supervision.  So you can't really make your conclusions based on the fact that no spectrum has been sold.

[txlaw]

just listened to the investor call. Sprint did not rule out working with clwr. they also implied over and over that clwr infrastructure and spectrum was not "cost effective" for Spring shareholders.

 

Of course they said that. 

 

Sprint is in the uncomfortable position of having a 54%-owned subsidiary that has a mind of its own and that has several strategic investors who could pull the rug out from under Sprint because of its unfortunate debt situation.  There's no way that the other strategic investors are going to let Sprint take CLWR for a song.

 

Sprint's investor call backfired.  Pure and simple.  Now S and CLWR investors have to pay the price for the strategic gambit because the price of capital has gotten more expensive for both companies. 

 

[Guest valueInv]

 

The higher bands (like the one Clearwire owns) have poorer propagation characteristics i.e. they don't penetrate buildings very well. So until recently these bands weren't in demand since you had to put up more cell towers. So none of the operators really focused on buying these bands.

 

But these higher bands are more capable at carrying more bandwidth i.e they have high capacity (but low range). That didn't really matter for 3G networks where data traffic is low (when compared to what is expected for 4G). 4G networks like LTE and WiMax make better use of this

capacity and hence, this spectrum becomes more valuable for these networks. LTE's highest efficiency/capacity occurs when deployed over a contiguous 20 Mhz band. It is difficult for operators to find continuous 20 Mhz in the lower bands. Hence, the value of the higher bands increases even more.

 

On the Sprint issue: Sprint may have other reasons to move away from Clearwire. My hunch is that it moved away because Clearwire may have different goals i.e. they may want to be a retail operator vs a wholesale operator. Sprint may think that the path Clearwire is following is unsustainable and not in its best interests.

 

you say the clwr spectrum is in high demand and coveted spectrum. But if that's the case why is clwr at $1.3 and down over 50% in a matter of days, and still trying to meet it's funding requirements? what is the disconnect?  if the spectrum is in high demand, why don't they sell some at high prices? why doesn't someone invest and give clwr the runway to execute it's business plan?

 

There could be a hundred different reasons for them not selling it. Don't conclude from the fact that they haven't sold it that it has no value.

Having worked in this industry,  I can tell you it has value. Don't expect rational behavior, this  is a decadent industry filled with morons. They have single handedly held back the progress of the entire Internet.

 

I don't have time to do the research on CLWR so I can't answer your question fully on their actions. Does it own the spectrum outright and have the right to resell it?

[dwy000]

Question for Brkr/Cardboard/Value: 

 

As a preface, I have no technical knowledge of spectrum at all.  That being said, I know there is major need for more of it over the long run and CLWR has some prime real estate.  So either the spectrum has real value and this is the sale of the century (even if CLWR goes bankrupt for liquidity reasons) or it doesn't have the value that many, including the company, believe and the price of the stock is appropriate - or even high.

 

I can't imagine VZ or T using CLWR as a wholesaler given Sprint's problems and VZ/T's desire to have full control over their networks.  It looks like S is going their own way as well.  So my question is, who would have interest in the spectrum, both on a wholesale basis through CLWR or in a bankruptcy situation buying it directly.  And if it's the DISH's, Leap's, etc. is the value to them anywhere near what it would be to VZ/T/S? 

 

Nobody seems to be beating down the door to acquire the spectrum here.  What will make that happen?  How long can everyone hold out without new spectrum and is there somewhere else they can get it?

[bmichaud]

Dwy,

 

I know I'm not one of the three experts here, but I've read enough to know that given CLWR's coverage of 130MM POPs in major markets and its pending switch to LTE, CLWR will be very valuable to all carriers in those markets not as the primary network, but as an offloading network in order to take stress off of those carriers' spectrum bands.

 

CLWR is also working on a WiFi initiative with the cable cos bc of the cable cos' desire to offer a complete package to their customers, i.e. smart phones and internet coverage where WiFi is unavailable (that's the extent of my knowledge on the cable initiative - brker_guy et al can answer more succinctly).

[txlaw]

just listened to the investor call. Sprint did not rule out working with clwr. they also implied over and over that clwr infrastructure and spectrum was not "cost effective" for Spring shareholders.

 

Of course they said that. 

 

Sprint is in the uncomfortable position of having a 54%-owned subsidiary that has a mind of its own and that has several strategic investors who could pull the rug out from under Sprint because of its unfortunate debt situation.  There's no way that the other strategic investors are going to let Sprint take CLWR for a song.

 

Sprint's investor call backfired.  Pure and simple.  Now S and CLWR investors have to pay the price for the strategic gambit because the price of capital has gotten more expensive for both companies.

 

or..maybe they said it because it was...true.

 

Is that what you believe?  If so, why?

 

Explain to me how it is more cost effective for Sprint not to use Clearwire.  I'm all ears.

[JHelg]

Just saw on the Yahoo message board (CLWR thread) that William Blessing just bought 10,000 shares on Friday at $1.70. William Blessing is on CLWR's BOD. Not a big deal, but still interesting. I wonder if anybody else will follow.

 

This thing and story is just so interesting and unbelievable--it is kind of exciting to watch.

 

http://www.sec.gov/Archives/edgar/data/1261494/000120919111051467/xslF345X03/doc4.xml

[Cardboard]

Peter Burke,

 

"Can't wait to see it play out, since I am long a few shares."

 

If you are convinced that the spectrum is worthless, since no visible offer for it has emerged yet, then why are you wasting any capital on CLWR? It will likely go lower from here if this is true and will yield next to nothing for equity holders in a bankruptcy court.

 

From the very beginning, the margin of safety with CLWR revolves around the huge amount of spectrum and of value for 4G. If this is wrong, then CLWR is just a money losing 4G wireless business that may turn out profitable someday which then offers very little asset backing or margin of safety. I would not even have looked at it especially with Sprint's finances who is clearly unable to buy it out (even before the Friday fiasco) and current large reliance on Sprint' 4G sales.

 

Being an owner myself, it has been a frustrating experience to say the least. However, based on previous experience, I would not decide on the company's fate or its asset values based on the share price action. Sometimes the market is right, sometimes it is wrong and I have seen it very wrong.

 

Sprint opened the door to outsiders on Friday and talks have been going on with other industry players as mentioned by Clearwire before. We don't know how far they are in the discussions and what they entail, but these things take time as anyone can tell after reading the "timeline" in any take-over circular. No one else does deals in a day like Buffett.

 

Cardboard

[txlaw]

just listened to the investor call. Sprint did not rule out working with clwr. they also implied over and over that clwr infrastructure and spectrum was not "cost effective" for Spring shareholders.

 

Of course they said that. 

 

Sprint is in the uncomfortable position of having a 54%-owned subsidiary that has a mind of its own and that has several strategic investors who could pull the rug out from under Sprint because of its unfortunate debt situation.  There's no way that the other strategic investors are going to let Sprint take CLWR for a song.

 

Sprint's investor call backfired.  Pure and simple.  Now S and CLWR investors have to pay the price for the strategic gambit because the price of capital has gotten more expensive for both companies.

 

or..maybe they said it because it was...true.

 

Is that what you believe?  If so, why?

 

Explain to me how it is more cost effective for Sprint not to use Clearwire.  I'm all ears.

 

since when is it incumbent on me to prove that they are telling the truth. It's incumbent on you to prove that they're LYING. To put it another way...I believe they are innocent. You believe they are guilty. Managers are incented to create free cash flow. I assume that if clwr could help them create more fcf and thus more personal wealth, they would use them. To believe they would work against their own self interest requires some explanation, no?

 

Haha, nice try.  We're not talking about a criminal trial.

 

It is incumbent on you to show why management's statements are BELIEVABLE in light of the facts, which have been laid out several times in previous posts by various board members, and which fly in the face of what Sprint management is saying.  Could it be there are reasons other than what has been presented to the investor community behind the approach Sprint has taken? 

 

You seem to be relying primarily on the statements of Sprint management and not on any other facts in making your assessment of the situation.  I mean, I know you're a CEO, but . . .

[bathtime]

Just saw on the Yahoo message board (CLWR thread) that William Blessing just bought 10,000 shares on Friday at $1.70. William Blessing is on CLWR's BOD. Not a big deal, but still interesting. I wonder if anybody else will follow.

 

This thing and story is just so interesting and unbelievable--it is kind of exciting to watch.

 

http://www.sec.gov/Archives/edgar/data/1261494/000120919111051467/xslF345X03/doc4.xml

 

Not sure what to make of the footnote on the filing:

 

"1. The purchase reported in this Form 4 was effected pursuant to a limit order adopted by the reporting person on August 18, 2011."

 

 

[bmichaud]

Peter burke,

 

Like I have been saying over on moore_capital's ridiculous "real value investor" thread - the beautiful thing about this business is that we can all be right at the same exact time!! Folks here believe that a non-distressed sale between two intelligent parties would most likely yield something in the range of $8 to $15 per share. So if we bought at $4, then that's at least a 50-cent dollar, and we created a margin of safety against our analysis being wrong. Welcome to value investing 101 - buy with a margin of safety in case you're wrong. Let's say my BK scenario works out and equity receives $2 to $3 per share - that's a 50pc loss at the worst if you bought at $4. If one bought at an estimated FV of $8 with zero MOS then that's a 75pc loss.

 

Just because something is down does not mean the thesis is wrong. Unless you yourself actually looked at this at $4 and determined this exact scenario was in the cards and avoided the situation, you have no room to talk. The BAC example is very similar - I have been saying berkowitz has been dead wrong NOT because the stock has gotten killed but rather because I avoided the stock for certain reasons at $15 that I thought should have been obvious to someone as smart as him.

 

The thesis on clwr is that they hold a very valuable asset that is only gaining in value. Sprint has done evrything in its power to undermine that value for reasons unbeknown to not only clwr shareholders BUT THE ENTIRE ANALYST COMMUNITY. Nobody knows what the f$ck Daniel Hesse is doing, so you taking him at his word is patently ABSURD.

 

Who cares if big clwr investors haven't stepped up to the plate yet? Perhaps everyone was waiting for Sprint to make the logical move of consolidating clwr. Bottom line, clwr is sitting on highly valuable spectrum AND a network covering 130MM POPs in the largest markets - I promise you things are going on behind the scenes to figure this situation out. John Stanton is not just sitting back with his thumb up his a$s as clwr runs out of money, despite what you have been saying.

 

And by the way, Sprint said it would stop selling wimax devices at fye 2012 - do you honestly think that means Sprint is just done with the clwr network? How about the fact that Sprint's LTE network won't even be done by 2012, or that wimax contracts sold at 2012 fye may have a contract that extends beyond the purchase date hahah.

 

I may not be an expert, but I darn well read enough to know this situation is FAR from over. It's not nearly as easy as "o, sprint"s going lte and leaving clwr". Are you kidding me? Even that doesn't even make sense - sprint is going for a 5x5 lte network WITH THIRTY MILLION IPHONES!!!!!!!!!!!! Are you kidding?????? There is NO WAY speeds are going to be competitive. No way. 

 

Burke this is far from over - why don't you back up your opinion with a short position. May the best man win.