Sprint board shake-up clears way for partnerships

Paris Burstyn and Jan Dawson/Ovum
08 Oct 2010

When three Sprint executives resigned from Clearwire’s board, they left it short of directors, direction, and cash, but not potential partners. We consider the opportunities and risks for Clearwire, Sprint, and T-Mobile as they consider their next steps.

Sprint’s move to avoid anti-trust issues invites a potential three-way

Dan Hesse, Keith Cowan, and Steven Elfman, all officers of Sprint Nextel, departed the Clearwire board of directors last week. Ostensibly acting out of an “abundance of caution” to avoid unspecified anti-trust problems, their move might represent a step toward a possible investment in Clearwire by Sprint’s competitor T-Mobile, a move that has been widely rumored recently.

Clearwire’s future financial stability and market progress depend on it getting an influx of cash. Its cable TV investors have demurred, leaving Sprint holding the bag.

Sprint faces its own resource demands and struggles to maintain its own market relevance. As a result, it may ultimately find its ability to help somewhat limited. Additionally, some senior managers at Sprint seem to have been frustrated by its inability to dictate the timing and priorities for Clearwire’s rollout of 4G in the US.

T-Mobile, which has not announced a strategy for 4G and is currently relying on HSPA+ as a medium-term stopgap, could benefit from an investment in Clearwire and the use of its network. However, that would set up a conflict of interest among the Sprint directors at Clearwire if they still held a majority of seats. Sprint’s reduced representation on the board means that any objection to T-Mobile on Sprint’s part will no longer stand in the way of a deal.

Joining forces at Clearwire would also give the third and fourth largest mobile carriers in the US a chance to work together. That experience might help them decide if they should move forward with a much-rumored merger.

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