CLWR Clearwire Corp. - Class A (MM)

Verizon Wireless, a unit of  Verizon Communications Inc. (VZ) reportedly has plans to acquire airwave licenses for major cities in the U.S. from Clearwire Corporation (CLWR). On Apr 8, Verizon made an offer of approximately $1 billion to $1.5 billion, excluding the present value of airwaves leased. We believe the odds against this deal remains much higher given the intervention of Sprint Nextel Corp. (S), which is a major shareholder in Clearwire and proposes to acquire the latter.

However, if Verizon acquires these airwaves from Clearwire it would add to the company’s current network expansion plans. The company is trying to enhance its existing network capabilities to offer uninterrupted wireless experience to its customers.  In this context, the company is working over spectrum acquisition that can support expansion plans in data services.

The company has already received approval from the Federal Communications Commission (FCC) to buy wireless spectrum from Spectrum Co., which is a joint venture between Comcast Corporation, Time Warner Cable Inc. and Bright House Networks in Aug 2012. The deal is priced at $3.9 billion.

To raise funds for this transaction, Verizon struck a deal with AT&T, Inc. (T) to sell 39 lower 700 megahertz (MHz) licenses to the latter. In exchange, Verizon will receive $1.9 billion and Advanced Wireless Services (AWS) spectrum licenses in five markets.

Additionally, Verizon planned the sale of three separate 700MHz spectrum blocks to small rural telecommunication firms. We believe the sale of lower spectrum assets and the consequent purchase of new AWS spectrum will work in favor of Verizon. The AWS spectrum holdings will double Verizon’s capacity as well as enable services at a much higher speed and expedite the LTE rollout, thereby driving data revenues and boosting its competitive position.

 
CLEARWIRE CORP (CLWR): Free Stock Analysis Report
 
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