Sprint seizes control of Clearwire

The carrier buys a majority stake in the wireless Internet provider to take on rivals Verizon and AT&T.

By Jason Notte Oct 18, 2012 2:20PM

 Silver globe with twinkling lights, copyright Tetra Images, Getty ImagesSprint (S) has lingered in U.S. telecom's second tier largely because it didn't have weapons to take on big-timers like Verizon (VZ) and AT&T (T).

By adding 4G wireless Internet provider Clearwire (CLWR) to its arsenal on Wednesday, Sprint took a big step toward becoming a formidable competitor.  

Just days after Japan's Softbank announced plans to buy a 70% stake in Sprint for $20.1 billion, Sprint turned around and paid telecom pioneer Craig McCaw's Eagle River Holdings $100 million for his stake in Clearwire. 

That gives Sprint a 50.8% controlling share. More importantly, it gives the company an Internet provider to compete with Verizon's FiOS and AT&T's U-Verse. Sprint held a 48% stake in Clearwire before the deal.

Since lobbying against AT&T's proposed merger with T-Mobile and effectively scuttling the deal, Sprint found itself squeezed on both sides of the wireless market. Already lagging behind AT&T and Verizon at the high end, Sprint saw new competition at the low end as T-Mobile announced plans to merge with prepaid wireless provider Metro PCS earlier this month.

Sprint has had a tough few years. Revenue fell from $35.6 billion in 2008 to $33.6 billion last year. The company lost between $2.4 billion and $3.5 billion in each of those years and was on pace to lose roughly $5 billion this year, thanks largely to continuing fallout from its merger with Nextel in 2005 and its roughly $21 billion in debt.

Sprint has been recovering from the merger and its debt, but it has been a slog until Softbank showed up. It's been a little more than a year since Sprint reached an agreement with Apple to sell the iPhone, but it sold only 4.8 million of the devices in the first three quarters. By comparison, Verizon sold 5 million iPhone 5s the first weekend after it was launched. Since then, Apple has sold more than 98 million iPhones, meaning Sprint could muster only about 5% of all iPhone sales.

Sprint recently began charging customers an $18 upgrade fee and $10 per month just to own one of its network's smartphones. To say it's looking for more revenue is an understatement, but Clearwire may be one way to get it. The provider pulled in $1.3 billion in revenue during its last fiscal year, but its $316 million in revenue last quarter was down slightly from the same period last year.

Meanwhile, Verizon's FiOS generated revenue of $2.5 billion in the third quarter alone, and it has video service that Sprint still lacks. AT&T similarly bundles television, Internet and voice service into its U-Verse packages and has 6.8 million subscribers, compared with Clearwire's 1.3 million.

It's a big pickup for Sprint but still small-scale stuff by Verizon and AT&T standards. Diversifying offerings is a huge deal, but it's going to take more than Clearwire for Sprint to get as big as its dreams.

More from Top Stocks

Oct 18, 2012 4:40PM
As long as they keep the remaining 4 mobile providers seperate we stand a chance of real competition and value. Once AT&T or Verizon try again it will be critical for the Feds to "Just Say No"!
Please help us to maintain a healthy and vibrant community by reporting any illegal or inappropriate behavior. If you believe a message violates theCode of Conductplease use this form to notify the moderators. They will investigate your report and take appropriate action. If necessary, they report all illegal activity to the proper authorities.
100 character limit
Are you sure you want to delete this comment?


Copyright © 2014 Microsoft. All rights reserved.

Fundamental company data and historical chart data provided by Morningstar Inc. Real-time index quotes and delayed quotes supplied by Morningstar Inc. Quotes delayed by up to 15 minutes, except where indicated otherwise. Fund summary, fund performance and dividend data provided by Morningstar Inc. Analyst recommendations provided by Zacks Investment Research. StockScouter data provided by Verus Analytics. IPO data provided by Hoover's Inc. Index membership data provided by Morningstar Inc.


StockScouter rates stocks from 1 to 10, with 10 being the best, using a system of advanced mathematics to determine a stock's expected risk and return. Ratings are displayed on a bell curve, meaning there will be fewer ratings of 1 and 10 and far more of 4 through 7.

123 rated 1
262 rated 2
480 rated 3
651 rated 4
649 rated 5
629 rated 6
616 rated 7
496 rated 8
346 rated 9
111 rated 10

Top Picks

TAT&T Inc9



Top Stocks provides analysis about the most noteworthy stocks in the market each day, combining some of the best content from around the MSN Money site and the rest of the Web.

Contributors include professional investors and journalists affiliated with MSN Money.

Follow us on Twitter @topstocksmsn.