Sprint's Clearwire board members resign, citing antitrust concerns, but there are more reasons for concern for the 4G providers

Sarah Thomas, Director, Women in Comms

September 30, 2010

2 Min Read
What's Really Behind Clearwire's Board Reshuffling?

Sprint Corp. (NYSE: S) has pulled three of its top execs, including CEO Dan Hesse, from Clearwire LLC (Nasdaq: CLWR)'s board of directors, the companies said today. They cited antitrust concerns as the motivator, but the timing suggests something else may be giving the companies cause for concern. (See Sprint Officers Leave Clearwire Board.)A Sprint spokeswoman says this was a preemptive move to comply with a nuance in federal laws. Both companies studied a recent case involving the National Football League and Section 8 of the Clayton Act, which prohibits interlocking directors. She says that Sprint decided it was best to replace Sprint employees Hesse, Keith Cowan, and Steven Elfman with independent directors rather than risk being in violation of the law.

But, seeing as nothing major has changed in the Clayton Act, Heavy Reading senior analyst Berge Ayvazian points out that something has probably changed within Clearwire and Sprint.

"My sense is that the structure of Clearwire's ownership at the moment is unstable," Ayvazian says. "They need additional funding, and they are unable to raise that funding given the current ownership structure."

Other investors like Comcast Corp. (Nasdaq: CMCSA, CMCSK) have been reluctant to invest further or have effectively written off their initial investment, he adds. Considering that, something has to change for Clearwire as they move into 2011.

A very plausible scenario is for Clearwire to be paving the way for new investors. It has been in talks with T-Mobile US Inc. for a while now about securing an equity investment from T-Mobile to use its WiMax network, spectrum the carrier lacks as of now. (See Clearwire & T-Mobile Still Talking.)

T-Mobile may be the most obvious candidate, but any number of 4G operators that need spectrum and need to make plans for 4G networks would be as well, Ayvazian says.

Of course, if this is to happen for Clearwire, then having antitrust concerns looming is problematic. By getting that out of the way, Clearwire could let new players in, and Sprint also has more flexibility to make its next move.

Ayvazian says Sprint could buy out the remaining 46 percent of Clearwire for full ownership, or it could do the opposite and carve a path to exiting with its assets still intact."As they go through the initial steps, they are trying to address potential concerns about the Clayton Act in anticipation of change or to create the flexibility to enable changes, but we don’t know what they are," he says.

In the meantime, things are proceeding as planned for the companies, at least for the rest of 2010. They turned on WiMax service in two new markets, Pittsburgh and Minneapolis/St. Paul, today. That brings the 4G service to 55 cities, Sprint says, with some major market launches still to come before the end of the year. (See Sprint WiMaxes in Two More Markets.)— Sarah Reedy, Senior Reporter, Light Reading Mobile

About the Author(s)

Sarah Thomas

Director, Women in Comms

Sarah Thomas's love affair with communications began in 2003 when she bought her first cellphone, a pink RAZR, which she duly "bedazzled" with the help of superglue and her dad.

She joined the editorial staff at Light Reading in 2010 and has been covering mobile technologies ever since. Sarah got her start covering telecom in 2007 at Telephony, later Connected Planet, may it rest in peace. Her non-telecom work experience includes a brief foray into public relations at Fleishman-Hillard (her cussin' upset the clients) and a hodge-podge of internships, including spells at Ingram's (Kansas City's business magazine), American Spa magazine (where she was Chief Hot-Tub Correspondent), and the tweens' quiz bible, QuizFest, in NYC.

As Editorial Operations Director, a role she took on in January 2015, Sarah is responsible for the day-to-day management of the non-news content elements on Light Reading.

Sarah received her Bachelor's in Journalism from the University of Missouri-Columbia. She lives in Chicago with her 3DTV, her iPad and a drawer full of smartphone cords.

Away from the world of telecom journalism, Sarah likes to dabble in monster truck racing, becoming part of Team Bigfoot in 2009.

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