T-Mobile USA last week indicated that LTE, not WiMAX, is its platform of choice for the future--but that doesn't mean it won't work out a deal with WiMAX operator Clearwire (NASDAQ:CLWR).
T-Mobile and Clearwire have been holding negotiations for months about whether T-Mobile will become a Clearwire partner. Clearwire CEO Bill Morrow late last month again confirmed the talks, but declined to elaborate.
But Neville Ray, T-Mobile's chief network officer, in an interview with Bloomberg last week, indicated T-Mobile has chosen LTE as its 4G path, calling WiMAX a "niche play" since the LTE ecosystem is expected to be much richer than WiMAX.
While WiMAX technology may not be appealing to T-Mobile, Clearwire does have a lot of other attractive assets, namely spectrum and microwave backhaul, that the operator may be looking at instead.
Because T-Mobile lacks spectrum to move to LTE it could it be working to buy or lease spectrum on Clearwire's network for LTE. Clearwire will need more money to continue its network expansion, and most of the company's current investors (such as Comcast) aren't interested in raising their stakes in the company.
Further, last week three top Sprint Nextel (NYSE:S) executives--CEO Dan Hesse, Steve Elfman, president of network operations and wholesale, and Keith Cowan, president of strategy and corporate initiatives--resigned from Clearwire's board. Clearwire said the action was an attempt to "address questions raised by Clearwire regarding new developments in antitrust law." The executives' departures, however, triggered speculation about a T-Mobile-Clearwire deal since Sprint, which holds a 54 percent stake in Clearwire, likely isn't keen on rival T-Mobile using Clearwire's network.
Clearwire CEO Bill Morrow has said Clearwire could raise money by selling off unneeded spectrum--but he said the company would prefer to score an equity investment from a service provider that would rent space on its network at a preferred rate, similar to the deal Sprint has with Clearwire.
Meanwhile, Clearwire has enough spectrum under its belt to deploy LTE while keeping WiMAX up and running. The operator is currently trialing LTE in Phoenix. So the question is, will Clearwire lease or sell spectrum to T-Mobile so it can build its own network? Or will Clearwire build an LTE network that T-Mobile can wholesale space on it? Or is there another option in the works?
Gerard Halleren, managing partner with TownHall Investment Research, believes there's a good chance that T-Mobile will enter a purchase agreement with Clearwire for microwave backhaul services as T-Mobile deploys and expands its HSPA+ network. In March, Clearwire announced that ongoing enhancements to its microwave backhaul network would increase its total backhaul capacity by 250 percent or more, with long-term capability to support gigabit-per-second speeds in high traffic areas.
T-Mobile plans to cover 100 major metropolitan areas--200 million people--with HSPA+ by year-end and will likely need additional backhaul capacity to meet its HSPA+ goals.
If T-Mobile and Clearwire do end up in some sort of partnership, whether for spectrum, LTE or backhaul, I think it's unlikely we will see T-Mobile offering WiMAX service in a traditional wholesale deal with Clearwire. --Lynnette