Clearwire's distribution deal with satellite TV providers DirecTV and EchoStar could be just a hint of things to come between these companies. Last week Clearwire, which also has a distribution agreement with AOL, announced the satellite providers will bundle Clearwire with their video services to consumers later this year. The deal says that EchoStar and DirecTV will have access to Clearwire's wireless high-speed network and will be able to market a bundle that includes Clearwire service to their residential customers. They also will be able to sell the Clearwire service separately on a stand-alone basis.
Clearwire's stock rose 23 percent on the news, almost near its initial IPO pricing of $25 a share. The deal may not change Clearwire's troubling fundamentals, namely its high debt load, but it pushes the company closer to being a takeover target. Remember DirecTV and EchoStar were expected to go big in the Advanced Wireless Services (AWS) auction. The two, who bid in partnership, plunked down the largest upfront payment of all bidders at nearly $1 billion, but subsequently dropped out of the auction when the bidding climbed too high.
Now a deal with Clearwire gives DirecTV and EchoStar the chance to experiment with WiMAX and see how the market receives it. Remember that News Corp. and its majority-owned DirecTV business were reportedly embarking on a plan with Clearwire last July to set up a nationwide WiMAX network that would provide a valuable interactive broadband loop used to sell content, goods, advertising and services directly to consumers.
If all goes well with this distribution deal, you can bet that DirecTV and EchoStar want a more tightly integrated strategy with WiMAX.--Lynnette