A Value Investor's Case For Clearwire [View article]

All I am implying is the spectrum-valuation should include a PV of the spectrum-lease-expense. You can assume whatever values you want for MHz-POP for owned or leased spectrum and whatever discount rate you think is best.

But what the above analysis implies in your pessimistic case is value_(owned spectrum) = $0.21 per MHz-POP value_(leased spectrum) ~ $0.41 per MHz-POP*

I am not implying that any of the numbers I used should be construed as accurate appraisals. My point relates to method & procedure only and I am pointing out that further clarification would be needed to take into account the inherent financial difference between owned vs leased spectrum.

A Value Investor's Case For Clearwire [View article]

If I am buying spectrum already subject to a lease agreement then I am not going to pay $0.20 per MHz-POP to Clearwire AND then pay another yearly lease-fee of $0.01 per MHz-POP per year to another third-party which is equivalent to another $0.20 at PV5%. Thus, if Clearwire were to sell its leased spectrum for $0.20, one can make the case that all that $0.20 would flow through to underlying leaser and NOT to Clearwire. Thus, Clearwire would only get paid in-full for its owned spectrum.

A Value Investor's Case For Clearwire [View article]

Hi Cale,

It looks like you are taking both the owned and leased spectrum to be the financially equivalent which is a mistake in my opinion. Clearwire has 19.32 b MHz-POP of owned spectrum and 26.68 b MHz-POP of leased spectrum. For their leased spectrum they paid a spectrum-lease-expense of $280m in 2010 or $0.01 per MHz-POP. Taking the present value of that lease-expense at a 5% discount gives roughly $0.20 per MHz-POP ($0.01/.05). The EV / MHz-POP (owned) = $0.23 (i.e. $4,400m / 19,320m MHz-POP). Basically, one can make the case that your pessimistic scenario is roughly equivalent to the current share price if one looks solely at the spectrum value.

## A Value Investor's Case For Clearwire [View article]

But what the above analysis implies in your pessimistic case is

value_(owned spectrum) = $0.21 per MHz-POP

value_(leased spectrum) ~ $0.41 per MHz-POP*

I am not implying that any of the numbers I used should be construed as accurate appraisals. My point relates to method & procedure only and I am pointing out that further clarification would be needed to take into account the inherent financial difference between owned vs leased spectrum.

*again assuming PV5%

## A Value Investor's Case For Clearwire [View article]

+($0.20) : PV5% of lease expense

----------------------...

$0.00 : Gross Profit to CLWR for leased spectrum

$0.20 : Revenue (Owned Spectrum)

+($0.00) : Cost

----------------------...

$0.20 : Gross Profit to CLWR for Owned spectrum

## A Value Investor's Case For Clearwire [View article]

## A Value Investor's Case For Clearwire [View article]

It looks like you are taking both the owned and leased spectrum to be the financially equivalent which is a mistake in my opinion. Clearwire has 19.32 b MHz-POP of owned spectrum and 26.68 b MHz-POP of leased spectrum. For their leased spectrum they paid a spectrum-lease-expense of $280m in 2010 or $0.01 per MHz-POP. Taking the present value of that lease-expense at a 5% discount gives roughly $0.20 per MHz-POP ($0.01/.05). The EV / MHz-POP (owned) = $0.23 (i.e. $4,400m / 19,320m MHz-POP). Basically, one can make the case that your pessimistic scenario is roughly equivalent to the current share price if one looks solely at the spectrum value.

-Chris