Interesting piece on two players in the wholesale data market. Couple comments:
- We probably need about 4-5 national players in mobile data that can deliver video/audio at consistent QOS levels. Clearwire and potentially Harbinger could fill some important gaps here as broadband demand increases.
- These plays tend to be highly leveraged. If the high yield market becomes unsettled again, it may be difficult for these and related businesses to finance themselves. In fact, the financial crisis has probably kept more competitors from entering.
- I am seeing a large increase in spectrum plays. All sorts of bands that have been out of play for a while, are all of a sudden back in business at the FCC and elsewhere. The FCC wants to get more spectrum into use and people are using that as an opportunity. That's probably a good thing and a lot of people sitting on spectrum are about to make a nice buck.
- Clearwire is using Wi-Max which as a "2ndary" standard has bit hit hard by the financial crisis. It's not clear if at some point people may shift entirely towards LTE. Clearwire has talked about being flexible in terms of air interface. However, Sprint could barely integrate Nextel's billing system let alone hot swap an air interface. It's a highly speculative play on wireless data growth in the United States.
- All of these plays could be under severe pressure if the EU problems don't resolve quickly so entry points could be some time away.
- While I noted a lot of private spectrum activity- private equity prices don't always correlate well with public markets.
In the US, two companies – Clearwire and Harbinger Capital – hope the data explosion will give them the chance to make profits through deals with established mobile operators and new entrants to the industry. Clearwire, the telecoms company whose strategic investors include Sprint, Comcast and Google, is building a high-speed mobile data network that will cover 120m people by the end of 2010.
While Clearwire is selling services to consumers that give them wireless internet access on their laptops, the company is heavily focused on reaching wholesale deals with its strategic partners and other companies.
The wholesale customers – which could include mobile operators that cannot afford to build their own infrastructure – rent capacity on Clearwire’s network. “We do see wholesale as a very big part of our future,” said Bill Morrow, Clearwire’s chief executive, in March.
Harbinger Capital, the New York-based hedge fund that is planning a fast mobile data network, is pursuing a similar wholesale business model to Clearwire, although there are big differences in the two companies’ technology choices.
Deutsche Telekom’s troubled T-Mobile USA subsidiary is one company that may be attracted to the wholesale solutions offered by Clearwire and Harbinger. Rene Obermann, Deutsche Telekom’s chief executive, has to decide whether T-Mobile USA should make a large investment in infrastructure based on fourth generation wireless technology, plus the radio spectrum to support it.
One way of avoiding the investment would be to strike a wholesale deal with Clearwire or Harbinger.
Robert Dotson, head of T-Mobile USA, said in March that T-Mobile USA had held talks with Clearwire, which already has several wholesale customers on its network, including Sprint. T-Mobile USA has also held talks with Harbinger, and the hedge fund’s planned network may be more attractive to Deutsche Telekom’s US subsidiary than Clearwire’s infrastructure.
This is because Harbinger’s network will be based on LTE, a 4G wireless technology. LTE is a successor technology to HSPA, which T-Mobile USA has used for its 3G network. Clearwire’s network is focused on a different 4G technology called WiMAX.
Harbinger’s decision to build a high-speed mobile data network should not surprise those familiar with its extensive interests in the telecoms industry, which include a 28 per cent stake inInmarsat, the UK company that provides satellite phone services.
Disclosure: d. long clearwire.