Sprint Seeks to Buy Rest of Clearwire for $2.1 Billion

Sprint Nextel Corp. has offered $2.90 per share of Clearwire Corp. as part of its effort to acquire the roughly half of Clearwire it does not already own, Bloomberg reports. 

The $2.1 billion bid is among the most-significant early developments since the Softbank purchase of Sprint for about $70 billion. 

Many observers might speculate that Sprint needs better control over the Clearwire assets if it fact it plans to launch a disruptive attack on the U.S. mobile market, as Softbank itself did in Japan. 

Data services are likely to be the focal point for any such effort, for obvious reasons. Voice and messaging services are a declining source of revenue for most providers, and Softbank already earns perhaps 66 percent of its Japanese revenue from data services. 

Add in the possibility of enticing consumers to buy subscriptions for tablets and other devices and ultimate mobile data penetration of three hundred to five hundred percent is conceivable, a claim Verizon Wireless itself made years ago, referring to machine-to-machine services as an example. 

It already is clear that Softbank has vaulted into the top ranks of global mobile service providers, measured either by subscribers or revenue. 

Some believe, based on past evidence, that Softbank will try to disrupt the U.S. mobile market, probably using pricing in some way. 

The reason for thinking Softbank will launch a pricing war, or perhaps better stated, a “value-price” war, is that it was what Softbank did earlier in the Japanese market. 

That might lead some observers to speculate about whether the Softbank-owned Sprint will try to become the “Free Mobile” of the U.S. market.In France, the Illiad-owned “Free Mobile” has disrupted the French mobile market. 

Already, FreedomPop is trying to disrupt mobile broadband pricing, as the Illiad Free Mobile effort already has done in the French mobile market.

In 2006, when Softbank decided to buy Vodafone KK assets, it likewise was criticized in some quarters for undertaking a risky gambit.

Some will argue Softbank is taking another huge risk by entering a country where iit has no previous operating experience, and by assuming a huge new debt load, after only recently shedding a similar debt load.

Softbank argues it is a reasonable risk, and that its prior experience taking on NTT Docomo and KDDI show it can compete in a market dominated by larger service providers.

Softbank, many believe, will use the same strategy it used in Japan, which some would describe as providing a large number of complementary features or services to create a “sticky” relationship with the end user.

Others will point to the pricing strategy. In Japan, Softbank’s 2006 acquisition of the Vodafone unit was not universally considered wise. 

But in just one year, Softbank managed to boost its subscriber base from 700,000 in fiscal 2006 to 2.7 million. By the beginning of 2008, Softbank had grabbed 44 percent of Japan’s new mobile subscribers, well ahead of KDDI’s 35 percent and NTT-DoCoMo’s 11 percent.

Some think Softbank will be willing to launch a price war, as well. 

In Japan, Softbank was willing to sacrifice voice average revenue per unit to make market share gains.Back in the 2006 to 2008 period, Softbank was willing to accept a $13 a month ARPU decline to build market share.

Spectrum will among the assets Softbank will be able to leverage. Hence the presumed need for full control of Clearwire.


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