There's been a deal brewing for a little while now between Sprint and Clearwire for Sprint to wholly purchase Clearwire. Sprint already owns 50% of Clearwire, but plans to get a cheap deal for the rest of the company $2.97/share. Going back in time we can understand what this is all about.
First off the Japanese company Softbank proposed the purchase of 70% of Sprint last fall for $ 20 billion which would give them complete control of the company. It should be know that Softbank offers 2.5 GHz spectrum at a much faster rate in Japan than any other carrier in the US. Softbank was interested in Sprint because of their 50% ownership of Clearwire which runs on the same spectrum as Softbank in Japan.
If the deal gets done Sprint will have more spectrum control than AT&T and Verizon combined and I think this is what Softbank was shooting for all along. Does this mean Sprint will have better reception in more places than AT&T and Verizon. No. What it means is Sprint could potentially have a much faster data rate than any of the other carriers and they would have the spectrum necessary to handle heavy traffic. In essence, Sprint's point of difference could be speed in metro areas and they already have unlimited data which would give them a serious edge in today's data hungry environment.
Their are some problems standing in the way however. First their is already a Clearwire shareholder, Crest Financial, wanting to block the Clearwire deal. Crest Financial says, “Sprint has sought to achieve on the cheap what neither it, nor any other carrier, has the capital to do otherwise: buy the entirety of Clearwire’s spectrum at fair market value. Sprint attempted to drive down the value of Clearwire so that it could acquire Clearwire after Sprint gained access to a funding source. But ... Clearwire simply has too much spectrum, of too high a value, to be acquired altogether by Sprint or, for that matter, AT&T, or Verizon.” So Crest has petitioned the FCC to block the deal.
The next problem for Sprint is getting the current deal done between them and Softbank. Just a day or so ago the Department of Justice asked the FCC to defer the deal as they are currently reviewing this matter for any national security, law enforcement, and public safety issues but have not yet completed that effort. (Another case of the US government being the visible hand of business)
In addition to these severe problems the next problem is infrastructure. 2.5 GHz has also shown better resistence to intereference. The problem with 2.5 GHz is the distance it can cover and penetration of walls. Hence you need 10x (could be more, I am no engineer) the cell towers as 700 MHz. Many carriers are already moving toward "mini-towers" as a way to eleviate network congestion and as for 2.5 GHz they would need a lot more mini-towers than say 700 MHz. Then becomes the task of getting approval from city and municipal entities, business owners, home owners associations, and land owners.
In our industry of cellular amplification it sounds like their could be a definite need for cellular signal boosters to cover 2.5 GHz. Right now nobody makes a cell booster for 2.5 GHz. I don't know if it's because of the market share of 2.5 GHz or the complexity of deployment. The development phase could take some time, but if this deal goes through I think there will be added pressure to get it done.
T-Mobile will finally add the iPhone to their smartphone lineup. T-Mobile hopes this move will really help them turn a corner. They've been losing customers at a fairly consistent rate this year thus far about 500,000 customers per quarter. Many speculate one of the top factors for T-Mobile customers moving to another carrier is the lack of having the iPhone. An estimated 4-5 million iPhones are to be sold next year on T-Mobile. This will hopefully help put a cap on the losses. However, T-Mobile's goal isn't to just stop losses, they're trying to win customers back. So their trying something a little different than the "others" next year.
Their putting a stop to phone subsidies. If you're not familiar with the term, it's when a cell provider sells you a phone at a lower cost in exchange for a 2-year contract. T-Mobile instead will sell the phones at full price yet have lower monthly rates which in the end turns out to be the better investment for the customer. Customers can still reduce the upfront cost if they choose to get the phone with an installment plan.
As an example, let’s do the math on the Galaxy Note II, for which T-Mobile already offers an option to pay in installments:
- The full price of the phone, without a contract, is $650.
- Under T-Mobile’s Value Plan, you can pay full price for the phone plus $45 per month for basic service, which includes 500 voice minutes, 2 GB of data and pay-per-text. The total cost of ownership over two years is $1,730.
- If you pay in installments, the up-front price is $250, plus another $20 for 20 months. On top of that, the cost of service is still $45 per month, bringing the total cost of ownership over two years to $1,730.
- AT&T, by comparison, subsidizes the Galaxy Note II for $300 with a two-year contract. The cost of service, at minimum, is $70 for 450 voice minutes, 3 GB of data and pay-per text. The total cost of ownership over two years is $1,980.
- In short, the total savings over two-years with T-Mobile is $250.
Unfortunately, I'm guessing most people will be pretty ignorant about the cost savings and overall benefits of doing business this way. This is because they have been conditioned for phone subsidies over the coarse of 15+ years or 8 phones of conditioning. Before phone subsidies you paid full price for a phone and you had to sign a contract. Then they started giving away the "free phones" for signing the contract, and recently the free smartphone with the contract. Some people are convinced an iPhone only costs $200. What will happen is you tell them the real cost and they'll think they're getting ripped off.