Sprint's Clearwire buyout could save unlimited data plans

Sprint's proposed $2.1 billion acquisition of the other half of Clearwire is almost bound to happen eventually, analysts say

By , IDG News Service |  

Sprint Nextel's proposed buyout of network partner Clearwire may be inevitable, and it could help Sprint keep its signature unlimited mobile data plans alive.

The fourth-largest U.S. mobile operator is in talks with Clearwire, which supplies its 4G WiMax service, to acquire the rest of the company, according to a regulatory filing Thursday. The proposed deal is expected to depend on Softbank's pending US$20 billion takeover of Sprint, which will bring $8 billion of new investment into the carrier and make it part of a much larger company.

Sprint already holds a majority stake in Clearwire and it is the major customer of Clearwire's wholesale WiMax service. The main asset it would gain from the deal is a set of huge wireless spectrum holdings in many cities, comparable to the frequencies held by either of the dominant U.S. carriers in those areas.

Finally owning Clearwire will give Sprint a coherent set of bands for its LTE network and the largest spectrum holdings of any U.S. carrier, said Chetan Sharma of Chetan Sharma Consulting. He and other analysts don't expect the U.S. Federal Communications Commission to block this consolidation of spectrum.

For consumers, the Softbank and Clearwire deals could mean Sprint's unlimited monthly data plans will be offered for a long time. It's expensive for a carrier to offer unlimited data because of the demands it can create on a network, but Sprint would be in a better position to keep those going after these deals, he said.

"Given the additional spectrum, as well as the cash infusion, I think they're likely to keep the unlimited model for a longer duration," Sharma said.

A buyout might bring a sigh of relief to Sprint and Softbank.

Sprint formed Clearwire in 2008 as a joint venture with an existing company by that name, which sold fixed wireless service. Google, Intel and several big cable operators invested heavily in the company. But Clearwire has never become profitable, and the network technology it uses was leapfrogged by LTE. Both Sprint and Clearwire are now moving into LTE, though they are still partners in providing 4G with the older system.

Though Sprint owns more than half of Clearwire and supplies most of its customers, it doesn't have a majority on the company's board. It took lengthy negotiations just to hammer out the deal under which the partners currently share their networks. That complicated relationship has to come to an end, analysts said. Jack Gold of J. Gold Associates compared it to a couple that's been dating for years.

"Either break up or get married," Gold said.

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