Experts clash over Clearwire spectrum value
Clearwire shareholders field former FCC commissioner to support their case that Sprint's offer undervalue 2.5GHz assets
Published: 14 March, 2013
Debates still rage over whether Sprint's bid for full control of Clearwire puts sufficient value on the broadband wireless operator's huge spectrum assets in the 2.5GHz band. Shareholders which oppose the Sprint offer argue that it undervalues the frequencies and a former FCC commissioner. Now both sides have commissioned reports to back up their case.
Sprint's bid was countered by a higher one from Dish Network, and officially Clearwire is still in talks with both, though last month it made very clear indications that it would go with Sprint, when it accepted a financing instalment from its largest shareholder (a counterbid was always going to be tough since Sprint holds just over 50%).
In the anti-Sprint corner, former FCC commissioner Dr Harold Furchtgott-Roth and the Analysis Group argue that the cellco's $2.97 per share offer greatly undervalues Clearwire's spectrum holdings. The report was submitted by the leading opponent of the deal, Clearwire minority shareholder Crest Financial. It states that the current offer values the frequencies at $0.11 per MHz/pop when a fairer figure would be $0.31-$0.50 per MHz/pop - which would, in turn, equate to an offer price of between $9.54 and $15.50 per share.
Furchtgott-Roth also maintains that Clearwire would see better profits in a scenario where it pursued its original business model of supporting several wholesale clients, rather than being part of Sprint. He said the "fragmented spectrum holdings of other US carriers create an opportunity for Clearwire to offer a valuable wholesale service" as the WiMAX operator, which is migrating to TD-LTE, "is able to operate on a single bandwidth in excess of 130MHz on average".
Furchtgott-Roth served as an FCC commissioner from 1997 to 2001 and has also served as chief economist for the House Committee on Commerce and a principal staff member on the Telecommunications Act of 1996.
On the other side, Sprint has commissioned its own report from Dr Kostas Liopiros of Sun Fire Group. This says that the offer price works out at a valuation of $0.21 per MHz/pop for the 2.5GHz spectrum, well above the report's estimate of the spectrum's market value, at almost $0.14 per MHz/pop.
The report cites various reasons for its lower valuation, notably the limited propagation characteristics of the 2.5GHz band, limited coverage, and the capacity restrictions in place in part of that spectrum, the EBS band.
Liopiros pointed to "legacy licensing and regulatory encumbrances" and said TDD spectrum had traditionally been valued below that for FDD, using the European example. Liopiros previously served as an advisor to the Secretary of Defense.