Clearwire and TMo in 4G talks again?

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Clearwire and TMo in 4G talks again?

As both firms expand their high speed coverage again, they may be closer to a deal

By CAROLINE GABRIEL

Published: 1 September, 2010

Reports have surfaced again that T-Mobile is in talks with Clearwire and Sprint to use their WiMAX network for its 4G strategy. The German owned cellco lacks the spectrum to build out 4G itself, and its parent Deutsche Telekom has made strong statements that it will prefer to rely on partnerships in markets where it does not have a top two position. Its US arm, the fourth largest cellco, is said to have conducted talks with both Clearwire and with LightSquared, which plans an LTE wholesale network. It may now be favouring Clearwire, especially if that firm proves its claims that it can support FDD modes and LTE in its spectrum in future, as well as its current TDD WiMAX platform.

In the meantime, TMo is racing ahead with its 3G expansion, which it has started marketing under the much-overused '4G' label, claiming HSPA+ can achieve the same rates as LTE or WiMAX in certain configurations and channel sizes. This may well be true, especially as the cellco said this week that it would leap ahead to the 42Mbps generation of HSPA+ in 2011, completely outstripping AT&T's much vaunted upgrade to 14Mbps this year.

TMo has expanded its current 21Mbps HSPA+ network some new markets, pushing high speed coverage past the 100m POPS mark. The service is now available in 55 major metro areas and today went live Boston, Miami and Richmond; plus three Californian markets (Fresno, Palm Springs and San Diego); Erie, Pennsylvania; Spokane, Washington; and Topeka, Kansas. Coverage is targeted at 200m POPS for next year.

Meanwhile, Clearwire expanded its WiMAX network to Boston as well, plus Providence, Rhode Island and Daytona Beach, Florida. This brought the mainly wholesale network to 52 markets and 60m POPS, a step towards the target of 120m by year end.

The Wall Street Journal revived reports that these two operators are discussing an MVNO deal, and even Deutsche Telekom becoming an investor in Clearwire. The most likely deals would be for leasing or even acquiring spectrum from Clearwire's substantial horde in 2.6GHz, or to lease capacity on its network as Sprint and three cablecos do.

The deciding factor would be Sprint, the largest shareholder at 54% and MVNO. There would be clear conflicts of interest with its nearest rival gaining the same advantages of plentiful capacity and early stage 4G technology. But TMo would boost Clearwire's commercial viability and at least such an agreement would keep it out of the clutches of rival LightSquared. Some Sprint board members are said to be strongly opposed to a TMo deal.

Clearwire said recently it was fully funded to complete its 2010 coverage plan, but also noted it was looking at other opportunities to finance further expansion, including possibly selling some of its spectrum (even though this is its greatest asset and competitive edge). The WSJ thinks Clearwire would need around another $4bn to expand past 200m POPS.

However the "unnamed sources familiar with the matter" said TMo has not yet submitted a formal proposal so to some extent nothing has changed. Robert Dotson, CEO of T-Mobile USA, confirmed back in March that his company had talked with Clearwire about a possible joint venture and Clearwire CEO Bill Morrow has commented in the past that he was interested in a deal with the cellco.

"T-Mobile would love to be in," one source told the WSJ. "But does Sprint want to help them that much? And at what price?"