Scribbles and Bits

by Derek Gathright

Sprint & Clearwire Merge, the Future of Wireless Broadband Is Set

Sorry for the Sprint emphasis early on, they are a local company that is always a center of  attention around here.

Sprint, as a brand, is pretty much dead. I can’t believe how badly Gary Forsee crippled that company. They purchased Nextel for $35 billion just three years ago, destroyed its network and fractured its customer base, and are now trying to sell it for a measly $5 billion while the FCC says it must relocate to a different spectrum, likely costing billions. Meanwhile, their landline services have since been spun-off as Embarq, and this latest move to offload its future 4G operation to Clearwire is an indication that the end is near.

So now they’ll turn around and sell Nextel, crippling that poor brand even more and leaving it as a shell of what it once was. At that point, all “Sprint” will have left is a backbone ISP operation, a dying wireless brand that will likely be sold to T-Mobile, investments in all of the spin-offs, and an arena that still doesn’t have an NBA team. (Humor for the KC readers)

Goodbye “Sprint”, I’m not sure what you’ll be in 5 years. 100+ year old companies don’t just dissapear into thin air, but I don’t think you’ll be very recognizable. Again, I’m talking about “Sprint” the brand.  Sprint the stock ticker is a great investment right now as I’ve been preaching the last couple months.  If you do still have your wireless voice services, I’m sure it will be under a commodity / white label brand until the current technology dies and eventually you’ll sell your shares in all your spin-offs to pay off the debt you racked up.

But, having said that, I think the move makes perfect sense and is a well played strategy. Sprint & Clearwire’s WiMAX project has great potential, but they have no money to fund it since Clearwire is only 4 years old and Sprint is $20 billion in debt, so they absolutely needed to join forces. Along with the new merger, they will also get an influx of much needed cash from Comcast, Intel, Time Warner, & Google, who are throwing in a $3.2 Billion investment.

So, the landscape is now set for The Great Wireless Broadband War of 2008-2014 (can I trademark that?)

Side A A) Sprint – Owns a large chunk of the back-end of the internet B) Google – Owns a large chunk of the front-end of the internet C) Comcast & Time Warner – Owns cable television & residential internet in the US D) Intel – Owns the processors that will power everything E) Skype – Assuming Google buys it

Side B A) AT&T vs Verizon – Dominant telcos in US who are launching their own 4G network sometime next decade. B) British Telecom – Dominant telco in UK C) NTT – Dominant telco in Japan D) Deutsch Telecom – Dominant telco in Germany E) Unnamed Skype Killer they are rumored to be working on to run on their closed networks.

So who will win? That’s a tough one, but here are some suggested investments; CLWR, S, GOOG, & INTC. Openness wins in the digital world.