Tracking SoftBank, Sprint and Clearwire

There is an axiom that suggests that pending deals tend to keep capital on the sidelines. There certainly is a good deal of truth in that: Why would planners dump money into a project or projects if the future orientation of the organization is unclear? In most cases, it pays to sit and wait.

The countervailing argument is that there are steps that need to be taken regardless of what group is at the helm. Indeed, an acquisition may happen with the overt understanding that certain things will happen while the deal is being worked through. The suitor can even contribute to the plans.

An example of a company on the cusp of being acquired moving ahead full throttle is Sprint’s move on 4G Long Term Evolution (LTE) deployment despite the agreement to sell 70 percent of itself to SoftBank.

Lightreading reports that Sprint executives said during its third quarter earnings call that the company is moving toward LTE in more than 200 locales. The gating factor, the story says, isn’t uncertainty over the sale but supply delays from its vendors, which the piece says include Alcatel-Lucent, Ericsson AB and Samsung. Reuters pegs the delay at about three months, a figure not used by Lightreading.

Thus, the exigency of remaining competitive – and being worth the money the acquiring company is ponying up – supersedes the natural inclination to be conservative while the deal plays out. It bears watching, however, to see how it plays out if the expansion into 4G hits sales bumps.

A commenter at the Lightreading post suggests that the entry of SoftBank actually could accelerate the rollout:

Sprint received the first $3.1 billion installment on the $20.1 billion investment by Softbank this week.  Coupled with a smaller than expected loss, this should provide the financial means for Sprint to reduce debt and accelerate the Network Vision build out.

Another issue to follow is Clearwire. Sprint owns 50.8 percent of the company, so it will be interesting to watch how it fares before the closing of the deal and after (if it indeed finalizes). This small but interesting item from the Kansas City Business Journal says that Clearwire may suddenly be a hot property. The story points out that Clearwire holds a good deal of wireless spectrum and suggests that was a driver of the deal. Bloomberg also says that the fate of Clearwire is tied to the SoftBank/Sprint deal.

Clearwire has struggled for years. Its emergence as an important factor in the Sprint/SoftBank deal should provide some comfort to companies such as BlackBerry and Nokia, which also have had a hard road. Of course, any good feelings these companies get from the sudden focus on Clearwire will be short-lived if SoftBank simply takes the spectrum and somehow disposes of the rest of Clearwire.