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With Competitors Struggling, Clearwire’s Fortunes Improve

It forges a deal with Leap Wireless and could provide wholesale service to other carriers short on wireless spectrum


In today’s broadband-thirsty wireless environment, spectrum is key, and if you’ve got it you are worth talking to.

That’s what Clearwire (NASDAQ:CLWR) is discovering. The company, based in Bellevue, Wash., recently added Leap Wireless International (NASDAQ:LEAP) to its very short list of wholesale clients, Bloomberg reported. Financial terms weren’t disclosed. The five-year deal calls for Clearwire to supplement Leap’s network capacity with Clearwire’s high-speed service, which is based on WiMax, a technology that the company plans to replace over the next four years with the LTE (long-term evolution) service being adopted by most carriers in the U.S.

The partnership follows Sprint’s (NYSE:S) recommitment last December to Clearwire, in which Sprint owns a majority stake. Back then, Sprint agreed to a deal worth up to $1.6 billion that helped keep Clearwire afloat. In exchange, Sprint was promised unlimited access to Clearwire’s 4G WiMax network.

In addition, pay-as-you-go carrier MetroPCS (NYSE:PCS) has told investors that it is looking for spectrum access and could become a Clearwire client, Bloomberg added.

Wireless carriers are facing network-capacity constraints as subscribers increasingly use their smartphones and tablets to download music, movie and photos. Clearwire’s clout with wireless carriers has grown considerably even though its 4G network is supported by WiMax technology while the rest of the wireless industry in the U.S. is adopting LTE. The company is, however, building out its LTE network, targeting densely populated areas where crowded bandwidths are making it difficult for wireless carriers to provide reliable service.

The Dish factor

Clearwire also is benefitting from uncertainty about how spectrum owned by Dish Network (NASDAQ:DISH) and privately held LightSquared will be used. Both companies saw their plans to build fourth-generation ground based wireless networks with LTE technology denied or delayed by the Federal Communications Commission.

LightSquared’s plans were blocked after the FCC, based on tests conducted last fall, indicated that the company’s satellite-based system interfered with many GPS devices, including those used by airlines and airfreight companies for navigation and safety. The FCC decision was followed by the expiration in January of a deal that would have allowed LightSquared access to Sprint’s spectrum for 11 years in exchange for $9 billion in cash. Sprint would have received $4.5 billion in service credits and first use of LightSquared’s 4G LTE network once it was built out.

LightSquared recently hired a legal team to help it fight the FCC’s decision.

This week, though, LightSquared suffered another setback as Sprint ended a partnership with the company to help it build network infrastructure that would include 40,000 cell towers, according to a report published by The Wall Street Journal. Sprint said it would return $65 million in prepayments to LightSquared that had been made to secure the partnership.

Dish, meanwhile, will have to wait until the FCC fields public comments on and fully evaluates the company’s plans to offer wireless cellular service using spectrum it recently acquired from its purchase of communications companies DBSD North America and TerreStar Networks. The FCC deliberations are not expected to be completed until at least the end of the year.

That has put Clearwire in a position that neither it nor its investors expected two months ago. As Kevin Smithen, an analyst with Macquarie Capital USA , told Bloomberg, “Clearwire has the most readily available spectrum on the market.”

Article printed from InvestorPlace Media,

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