June 18, 2013
Clearwire Corp. has long been the U.S. wireless industry's most embattled carrier. In recent months, the money-losing company has also emerged as its crown jewel. The company, which covers less than half the U.S. population with high-speed mobile Internet service, has teetered on the brink of bankruptcy. ow, both Dish Network Corp. and SoftBank Corp. are showing keen interest in Clearwire's huge stockpile of spectrum even as they battle for control of Sprint Nextel Corp., a majority owner of Clearwire.
The contest heated up a notch Monday, when Sprint sued Dish saying its offer to buy Clearwire shares violated Sprint's rights as a shareholder and Delaware law. Dish has said its offer was lawful and on Monday said it was considering its options. Clearwire said it doesn't comment on litigation. The spectrum has become a prized asset thanks to a sea change in how people use their mobile devices. Without it, Dish and Softbank's opportunities to offer a new slate of wireless services could be limited.
More than a month ago, before Dish boosted its bid for Clearwire, Dish Chairman Charles Ergen hinted to Wall Street on an earnings conference call that the small wireless company was behind the dramatic merger brawl between himself and fellow billionaire Masayoshi Son, the CEO of Japanese telecom and Internet company SoftBank. "If you look at the synergies that we're talking about and look at the synergies that SoftBank talks about, a lot of those synergies are in Clearwire," Mr. Ergen said. "It was considered swampland spectrum and now it's kind of beachfront property." The wireless data boom-as seen in Americans' deepening addiction to using their phones and tablets to stream music, watch YouTube videos, and upload Facebook photos-is behind Clearwire's sudden popularity.
The average smartphone in the U.S. generated 577 megabytes of mobile data traffic a month last year, up from 389 megabytes in 2011, according to Cisco Systems Inc. For things like making calls, sending text messages, reading the news and checking email, the existing "3G" networks that cover most of the country have served the wireless carriers well. But carriers are now scrambling to beef up their coverage in dense urban and suburban areas to carry heavier traffic like video. That is where Clearwire comes in. Rather than using the Clearwire spectrum to build a national network, SoftBank and Dish have said they would use the company's spectrum to provide additional capacity in areas where data use is highest. In dense areas, the fact that signals on Clearwire's spectrum don't travel very far isn't as much of a disadvantage, while the large amount of spectrum that Clearwire controls means it can carry a large amount of traffic.
In the U.K., wireless carriers are already planning similar moves. Earlier this year, the government there raised $3.7 billion in a spectrum auction that included similar airwaves to what Clearwire uses. The airwaves are "fantastic for speed and capacity," said Howard Jones, a spokesman for U.K. wireless carrier EE, which paid $925 million in the auction. In recent months, Verizon Wireless has offered to buy some of Clearwire's spectrum. And Google Inc., which sold out of an earlier Clearwire investment last year, continues to be interested in the company. Top executives at the search giant are paying close attention to the company's fate and see it as key to the U.S. wireless industry's future, according to people familiar with the matter. A Google spokeswoman declined to comment.
The hope for SoftBank and Dish is that as more wireless carriers around the world start using the same frequencies, an "ecosystem" of cheap smartphones, tablets and other devices will emerge that supports that spectrum. Cellular pioneer Craig McCaw founded Clearwire a decade ago with the aim of building the country's first nationwide wireless high-speed network. He pieced together spectrum-the right to use the airwaves to offer wireless service-through deals with schools, churches and, ultimately, an agreement with Sprint, which contributed much of its spectrum to the company and in turn received a majority stake. But the large swath of spectrum that Mr. McCaw ended up controlling was higher up on the radio dial than just about any other airwaves used for cellphones. The higher the frequency, the less robust signals are when traveling over long distances. That means covering a large geographic area with Clearwire spectrum requires more cellphone towers than lower-frequency spectrum.
The expense of building out its network contributed to Clearwire's malaise in recent years, as the company's stock price plummeted from a post-IPO high of more than $30 in 2007 to a nadir of around $1 last July. Network construction stalled, as funds ran dry. A bad relationship with part owner Sprint, and a bet on a technology standard that other wireless carriers didn't end up following, also hurt progress. Mr. McCaw resigned as chairman at the end of 2010. But in the last 12 months, Clearwire's shares have tripled to $4.63, as investors hoped for an acquisition. When SoftBank announced a $20 billion deal for Sprint in October, SoftBank's Mr. Son spoke at length about his interest in Clearwire's spectrum. And shortly after Sprint agreed to a deal in December to buy the half of Clearwire it didn't already own for $2.97 a share, Dish jumped in with a competing offer. Clearwire is now in the middle of a full-blown bidding war. Sprint, with SoftBank's blessing, raised its bid in May to $3.40 a share. A day before Clearwire's shareholders were to vote on that deal, Dish raised its own offer to $4.40. Clearwire recommended shareholders accept the Dish offer. Sprint's lawsuit, filed Monday in the Delaware Court of Chancery, seeks to stop Dish's tender offer to shareholders. Sprint said Dish has attempted "to fool Clearwire's shareholders into believing its proposal was actionable." Wall Street Journal
The state's Independent Fiscal Office released its official revenue projection for 2013-14, predicting the state's tax collections will grow by 1.2 percent over this year. That projects the state's general fund revenues will bring in more than $29 billion, barring any changes in law. That is $147 million higher than the office's preliminary revenue growth estimate of $28.9 billion issued last month because revenues came in higher than anticipated. It estimates the state will end the fiscal year this month having collected $28.7 billion from general fund revenue sources. That amounts to an anticipated $144 million revenue surplus.
"This official estimate incorporates projections for sustained, but modest, economic growth over the next fiscal year," said Matthew Knittel, the Independent Fiscal Office's director. "The economy continues to expand, but it faces headwinds as consumers adapt to the expiration of the payroll tax cut and as the automatic spending cuts from the federal sequester are implemented. Prospects for stronger growth improve toward the end of 2013 and into 2014." Gov. Tom Corbett proposed a $28.4 billion spending plan for 2013-14 while the House passed a GOP budget plan that would spend $28.3 billion. House Majority Leader Mike Turzai, R-Allegheny, said he was pleased with the Independent Fiscal Office's forecast that confirms the revenue forecast built into the House Republican budget passed last week. Associated Press
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