What do Clearwire’s difficulties mean for LightSquared?

Posted in Financials, ICO/DBSD, LightSquared, Operators, Spectrum, TerreStar at 4:18 pm by timfarrar

Last Thursday, Clearwire announced that it was laying off 15% of its staff (as I suggested a couple of weeks ago), in an attempt to conserve its cash resources, which are only expected to last “through the middle of 2011″. When news first emerged of the Clearwire spectrum auction back in mid-October, I suggested that it was going badly and appeared to have been leaked by Clearwire itself, and it certainly doesn’t appear that the auction has concluded with a positive outcome (i.e. with T-Mobile agreeing to pay a significant amount for the 40MHz of spectrum that Clearwire was trying to sell).

The question now arises of what this means for LightSquared, which has also been pursuing a deal with T-Mobile as a potential wholesale customer and/or strategic partner for its 4G LTE network. Although T-Mobile appears not to have struck a deal with Clearwire, and thus is at least potentially still a partner for LightSquared, it is far from clear whether this is good news. If T-Mobile’s interest in Clearwire was thwarted because of roadblocks thrown up by Sprint (i.e. Sprint’s unwillingness to share a network with a key competitor), then it is quite possible that a deal with LightSquared could still be on the cards. However, if instead T-Mobile has decided that the price of spectrum is only going to go down over the next 6-12 months (and perhaps even in the medium term), as Clearwire and LightSquared become increasingly desperate for a deal, then that would certainly be bad news. T-Mobile might even be waiting to see if the 2GHz MSS spectrum could present another possible alternative, once the TerreStar and DBSD bankruptcies are resolved, given that this spectrum is closer to its existing PCS and AWS holdings than either the LightSquared L-band spectrum or the Clearwire 2.5GHz spectrum, and could even be available without ATC restrictions (via an incentive auction) in a couple of years’ time.

Whatever the reason, if T-Mobile does delay its decision on 4G spectrum (which might well be suggested by the recent rebranding of its HSPA+ network as 4G), then that would tend to indicate that it is not feeling too much pressure from the supposed “spectrum crunch”. While that may be at least partly because it won’t be offering the iPhone anytime soon, it will be interesting to see whether it also prompts more people to question the received wisdom about future spectrum demand.

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