Deutsche Telekom Said to Be Talking With Clearwire to Expand U.S. Networks
Sept. 22 (Bloomberg) — Deutsche Telekom AG is in talks to gain access to airwaves controlled by Clearwire Corp. and MetroPCS Communications Inc. as the German company seeks to expand U.S. networks, said two people familiar with the matter.
Context & Ripple Effects
Clearwire enters these talks from a position of weakness. It has a confirmed funding gap of roughly $2 billion, reported in February 2009, that could delay its network expansion and set back backers such as Intel and Google; customers have publicly complained about poor support, low speeds, and high latency in its early service launches; and its original agreement with Sprint to bring WiMAX to 100 million people was terminated back in November 2007. The company is still courting developers — it launched a Silicon Valley WiMAX Innovation Network covering more than 20 square miles in April 2009 — but scale requires capital it does not have.
For Deutsche Telekom, the rumored route — both the Clearwire and the MetroPCS conversations are unconfirmed, per two people cited by Bloomberg — is access to deployed or licensable airwaves for its U.S. operations without waiting on auction cycles. The story drew no syndicated pickup beyond Bloomberg's own report, so the market impact hinges on whether either negotiation is real.
First-order effects
- A spectrum-access deal would give Deutsche Telekom's U.S. operation capacity for network expansion immediately, while handing Clearwire a path toward closing part of its confirmed ~$2 billion funding gap.
- MetroPCS would convert airwaves it holds into partner revenue, and Clearwire would gain cash to address the service-quality complaints documented in its early launches.
Second-order effects
- Funding relief for Clearwire would de-risk the WiMAX bet made by its backers Intel and Google, whose returns depend on the network reaching scale after the Sprint joint-build plan collapsed in 2007.
- AT&T and Verizon would face a better-capitalized third national competitor, forcing responses on pricing and their own spectrum positions.
Third-order effects
- If carriers keep sourcing capacity through bilateral deals instead of auctions alone, spectrum becomes a tradable input concentrated among a few national players — squeezing regional holders like MetroPCS toward sale or partnership.
- Whether Clearwire's WiMAX architecture survives depends on exactly this kind of external capital; a German-funded rescue would tie the U.S. 4G standards race to one carrier's balance sheet.
The trend: U.S. wireless capacity is migrating from pure auction purchases to carrier-to-carrier spectrum deals, as cash-strapped holders like Clearwire and MetroPCS monetize airwaves they cannot deploy alone.