Sprint is about to get a deal on wireless spectrum—the electromagnetic real estate telecommunications companies need to broadcast and receive signals—in the form of its acquisition of Clearwire, for $2.2 billion. Clearwire is the troubled mobile wireless company of which Sprint already owns half; this deal would put Sprint fully in control of Clearwire, its $4.2 billion in debt, and a huge swath of spectrum. And spectrum, like land, is something they ain’t making any more of. Owing to the laws of physics, there’s only so many wavelengths of light on the electromagnetic spectrum, and pretty much much everywhere, use of that limited spectrum is tightly regulated. As I’ve explained before:
In case you’re not up on your US telecom lingo, here’s why spectrum matters: Broadcasting at whatever frequency you like would lead to all kinds of interference and no wireless signal would ever get through. That’s why the US Federal Communications Commission, and its equivalent in every other country on the planet, periodically auctions off portions of the electromagnetic spectrum. Whoever gets the rights to this spectrum can do with it as they see fit.
With an acquisition, Sprint would own a mind-boggling 184 MHz of spectrum, which is more than AT&T (77MHz) and Verizon (83MHz) combined. More spectrum means more bandwidth, and more bandwidth ultimately could ultimately mean faster wireless speeds for Sprint’s mobile customers. It’s as if Sprint is about to have a highway with twice as many lanes on it than either AT&T or Verizon. (That said, both AT&T and Verizon currently have about twice as many subscribers as Sprint’s 50 million.) The acquisition of Clearwire by Sprint may be the primary reason that Japan telco Softbank invested in Sprint in October. As we noted at the time:
And what Clearwire wants to do with its chunk of spectrum is build out a kind of high-speed wireless network (called TDD LTE) that isn’t accessible by any mobile device in the US–yet. But once Clearwire/Sprint are finished building this network, it happens that it will cover the same range as spectrum already owned in Japan by none other than Softbank.
The idea is that if Sprint in the US and Softbank in Japan own the same chunk of spectrum, handset makers like Apple and Samsung will have an incentive to create devices that can take advantage of their networks, potentially allowing their customers faster wireless access to the internet than any other combination of devices and carrier in Japan or the US. Clearwire is already building a next-generation high speed wireless network, faster even than the one currently being rolled out by Verizon and AT&T.
Sprint still has to decide what to do with an older “4G” network Clearwire built out, called WiMAX, a technology that the rest of the wireless industry has more or less abandoned. That’s a lot of towers that, in theory, will have to be retrofitted if it switches over to the new standard, known as LTE. In the long run, owning this much spectrum presents Sprint with an unprecedented opportunity to catch up to AT&T and Verizon, breaking the US mobile carrier duopoly. That’s one reason why some shareholders in Clearwire think Sprint’s offer for the company is too low. Given Sprint’s ownership of half the company, however, it appears the deal is likely to go through.