Sprint tries to eat MetroPCS

[christopherc18]

http://www.engadget.com/2012/02/24/sprint-almost-bought-metropcs-for-8-billion-hesse-said-yes-bu/

 

 

What would be the benefits/liabilities of taking over Metro?

[tybo31316]

Only benefit that I see is they would gain 9 million customers, more pcs spectrum, and some aws spectrum. Why not just buy the rest of clear build a strong lte network and take other carriers customers with unlimited lte. I'm happy it was denied. Sprint needs to take that 8 billion and put it into their network.

[ericdabbs]

Deal is reportedly dead. I am not so sure this was in the best interest of Sprint shareholders. The only thing I care about is what spectrum holdings does MetroPCS have? I believe they have some AWS spectrum which would have been a nice introduction for Sprint to get into that spectrum band.

 

http://dealbook.nytimes.com/2012/02/24/sprint-deal-for-metropcs-said-to-have-collapsed/

[legion125]

Agreed, the boards only job is to provide value for stock holders. If they didn't like how it was packaged then its done. I wonder if they are getting impatient with Hesse? Although this could be nothing, you have to look at the boards reaction and see if they are sending a signal. i guess we'll know more on Monday when the statements and analysts come out.

[WiWavelength]

I believe they have some AWS spectrum which would have been a nice introduction for Sprint to get into that spectrum band.

 

I disagree on the AWS.

 

Recall that Sprint was a partner with Comcast, Time Warner, and Cox in SpectrumCo, which won nearly nationwide AWS 2100+1700 MHz spectrum at the AWS-1 auction in 2006. A few years ago, however, Sprint cashed out of the partnership. And now the cable companies are selling the spectrum to VZW. If Sprint had wanted to add AWS to its portfolio, then Sprint should have stuck with SpectrumCo.

 

Furthermore, MetroPCS would bring more than just PCS and AWS spectrum to the table. MetroPCS also controls some Lower 700 MHz spectrum. So, those would add two more to Sprint's growing list of band classes: PCS 1900 MHz, SMR 800 MHz, BRS/EBS 2600 MHz. And, honestly, Sprint has its hands full with its current bands, two of which are essentially unique to Sprint. So, Sprint would be unwise to fragment its spectrum holdings even further.

 

For those interested in MetroPCS' spectrum holdings, I just so happened to compile the top 100 markets a few weeks ago and produced this graph:

 

 

 

AJ

[ericdabbs]

Recall that Sprint was a partner with Comcast, Time Warner, and Cox in SpectrumCo, which won nearly nationwide AWS 2100+1700 MHz spectrum at the AWS-1 auction in 2006. A few years ago, however, Sprint cashed out of the partnership. And now the cable companies are selling the spectrum to VZW. If Sprint had wanted to add AWS to its portfolio, then Sprint should have stuck with SpectrumCo.

 

Furthermore, MetroPCS would bring more than just PCS and AWS spectrum to the table. MetroPCS also controls some Lower 700 MHz spectrum. So, those would add two more to Sprint's growing list of band classes: PCS 1900 MHz, SMR 800 MHz, BRS/EBS 2600 MHz. And, honestly, Sprint has its hands full with its current bands, two of which are essentially unique to Sprint. So, Sprint would be unwise to fragment its spectrum holdings even further.

 

For those interested in MetroPCS' spectrum holdings, I just so happened to compile the top 100 markets a few weeks ago and produced this graph:

 

 

 

AJ

 

Definitely times have changed in the wireless world where data demand has surged tremendously because of the smartphone and carriers are in huge need for spectrum. I am not sure which year Sprint cashed out of SpectrumCo but at the time I am sure Sprint was thinking that they didn't anticipate that they would ever have a need for AWS spectrum since their operations are in the PCS band and their cell towers at the time were ancient that they knew it could not handle it. Heck I don't even think that the current Sprint towers before NV would be able to handle CDMA at 800 Mhz. However I believe that once NV was announced and the fact that one of the key benefits of its multimodal towers is the ability to host different spectrum bands which includes hosting AWS spectrum. Of course Sprint has been in dire straits financially for the last couple years and couldn't afford to buy out the AWS spectrum from Spectrum Co. I would have to think that looking back in hindsight that Sprint regrets selling its partnership stake in Spectrum Co knowing now that having additional spectrum is so key for the wireless industry and the fact that they will need to hunt for additional spectrum in 2014. It would have been nice to have AWS spectrum as the ace in the sleeve. This is just my opinion.

 

I didn't know that MetroPCS had 700 Mhz spectrum but from looking at the chart its pretty useless since its only in 4 markets and don't really care for 700 Mhz that much. It wouldn't have been worth the time for Sprint to try to integrate 700 Mhz if the merger went through. I really like the spectrum chart that you have put up comparing MetroPCS and Leap. After looking at the chart, I think I am glad the MetroPCS deal did not go through. Leap Wireless seems to have better spectrum holdings in both the PCS and AWS spectrum than MetroPCS. I think Sprint should try to go for a Leap Wireless merger sometime in the future.

Edited February 25, 2012 by ericdabbs

[irev210]

This is the way I looked at it:

 

Advantages:

• 
  Sprint is actually really good running prepaid carriers (primarily boost and virgin). If I am not mistaken, all of Metro's customers can roam on sprint, so all of the handsets would merge wonderfully onto sprint. Adding ~10 million prepaid customers would be very easy and fit nicely into sprint's prepaid model.
  
• 
  Sprint doesn't need Metro's spectrum and could profit handsomely off of selling the AWS and 700MHz spectrum to AT&T (or leap).
  
• 
  With network vision and LTE going live, there will be extra capacity on CDMA voice/data channels - 10 million customers would help use that.
  

Disadvantages:

• Sprint is finally gaining traction on actually fixing itself. They have a lot on their plate right now (network vision, iPhone, improving customer experience, etc).
  
• Price. I think when the board looked at the proposed value of 10 million prepaid subs vs. the value of Sprint, it was a hard pill to swallow. If Sprint's stock price was in a different position, I think this would have gone differently.
  

 

I think that at the end of the day, the timing was just wrong.

[legion125]

Price. I think when the board looked at the proposed value of 10 million prepaid subs vs. the value of Sprint, it was a hard pill to swallow. If Sprint's stock price was in a different position, I think this would have gone differently.

 

 

I think that at the end of the day, the timing was just wrong.

 

Agree. This article speculates that the timing was wrong and the Board and Hesse are still on the same page. Hesse's position seems to be safe for now.

 

http://www.fiercewireless.com/story/report-sprint-board-nixes-metropcs-acquisition-last-minute/2012-02-24

[legion125]

Here's some more news. Board said "it just didn't feel right". I don't know, some analyst are saying that Leap my be a target for Sprint and Metro PCS may end up being a T-Mobile acquisition. Either way, Hesse is going to be feeling the pressure if not already.

 

http://www.phonearena.com/news/Sprints-Board-said-MetroPCS-merger-didnt-feel-right_id27298

[ericdabbs]

The timing of the attempted MetroPCS purchase was just not right. I am not sure if Sprint has the luxury of exploring possible acquisitions at this point and diverting focus from Network Vision and possible additional funding of Clearwire.

 

Either way I think a purchase of Leap Wireless would make more sense than MetroPCS.

[shaunm82]

Speaking of funding Clearwire, looks like Sprint is trying to raise a few $$

 

http://www.businessweek.com/news/2012-02-27/sprint-to-raise-2-billion-in-debt-may-use-to-fund-clearwire.html

[MacinJosh]

Speaking of funding Clearwire, looks like Sprint is trying to raise a few $$

 

http://www.businessw...-clearwire.html

 

Wow, I guess I'm not surprised that they are trying to raise more money. I don't know why they don't just buy Clearwire out. It would make more business sense at this point.

[tybo31316]

 

Wow, I guess I'm not surprised that they are trying to raise more money. I don't know why they don't just buy Clearwire out. It would make more business sense at this point.

 

Probably scared that the FCC is going to make them offload some of that spectrum that clear has.

[ericdabbs]

Wow, I guess I'm not surprised that they are trying to raise more money. I don't know why they don't just buy Clearwire out. It would make more business sense at this point.

 

I wouldn't buy Clearwire at this point. Their balance sheet is a mess and if Sprint bought Clearwire then their spectrum portfolio would be more than Verizon and AT&T. You can say goodbye to participating in any future FCC spectrum auctions and not to mention that they'll probably need to divest some of that spectrum anyway. Besides Sprint has no money to acquire new companies.

 

Sprint needs to still acquire some more favorable spectrum which better building penetration. 2.5 Ghz is nice for capacity but since they don't have a full LTE network up yet, capacity is a not a problem. Down the road when both Clearwire and Sprint improve their balance sheets, they can both come back to the table and negotiate a potential buyout of Clearwire.

[S4GRU]

Capacity is a problem. You cannot manage a network only looking out 60 days. Verizon started buying out AWS spectrum years in advance, and that has proven to be genius. No one criticized VZW and say they need to stop worrying about capacity. Why would you say that about Sprint?

 

Wireless cos need to be looking out very detailed the next 12 to 24 months, pretty detailed the next 36 to 48 months, and you better have schematic plans for 5 to 6 years. And when it comes to spectrum, you cannot look out far enough. I bet MetroPCS wishes they had managed spectrum more imminently. And AT&T, too.

[MacinJosh]

at&t, the squanderer of wireless spectrum! They need to develop all the spectrum they have and then complain if they don't have enough after they are complete with that project.

[Duffman]

A post in another forum asked:

 

 

I really don't get Sprint continuing to "support" an independent "Clear" when they already own ~ 50% of the company. Google is selling it at a loss, $1.60 a share and Sprint should snap up every share at that price if they can. The debt is already on the books, just pay it off as Sprint and take the 2.5Ghz spectrum back under Sprint control.

 

Giving Clear another 600 Million is throwing good money after bad. Buy up the rest of the company now, and put 2.5 Ghz in all of the Network Vision towers.

 

So why wouldn't Sprint purchase Clear? Liabilities?

[S4GRU]

I actually cannot come up with any good reason for Sprint not to buy Clearwire at this time, except for possibly the funds to do it. With every dollar they give to Clearwire, they should be demanding further equity in the company.

 

I know that Sprint is afraid of being saddled with Clearwire's debt. But Clearwire is already virtually blackmailing Sprint into making their debt payments when they come due. Sprint pays them now, because they know they cannot lose the spectrum to Clearwire bondholders.

 

So if you are stuck with the debt either way, you might as well take control of the company! That's my two cents!!!

 

- Robert

[legion125]

Agree, Sprint is so far in the hole because of Clear, they might as well go all in. if they could afford to make a run for MetroPCS, then an outright purchase of Clear is chump change. Yes their debt is an issue, but it's not like Sprint is a stranger to that.

[pyroscott]

This deal may have some life in it yet. If Sprint can raise their share price, they might revisit the deal.

 

The deal the board rejected priced MetroPCS stock at roughly $8 billion, which is a 30% premium to its current share price, but it has not yet ruled out another offer.

 

http://seekingalpha....pside-potential

[S4GRU]

This deal may have some life in it yet. If Sprint can raise their share price' date=' they might revisit the deal.

 

http://seekingalpha....pside-potential

 

Thanks for the link. I always enjoy reading the articles at Seeking Alpha on Sprint and Clearwire. Less sensational and very meaty info.

 

Robert

 

Posted via Forum Runner

[twospirits]

Good info.

[legion125]

It would be interesting to see if the board would allow another go at Metro PCS for better terms. However, the article said Sprint may be looking for other aquisitions. I wonder now that LEAP signed that agreement with Clear if they or who else would be considered?

[ericdabbs]

I still think an acquisition of Leap Wireless is better than MetroPCS since they have better spectrum assets IMO. Based on Wiwavelength's spectrum chart comparison in the first page, it looks like Leap has more AWS and PCS spectrum holdings in more markets than MetroPCS. Not to mention that I think an acquisition of Leap would be cheaper than MetroPCS.

[legion125]

Strategically it may be a good fit spectrum wise, but a Sprint/Cricket tie-up? I still can't get my head around it.