Just When Do Wireless Companies Go High-Speed?

Josef Ray is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.

Clearwire Corporation (NASDAQ: CLWR) is a wireless broadband services company that  puts up and controls next generation mobile broadband networks which enables high-speed mobile and home internet access. Established in 2008, it started with a joint venture with Sprint Nextel Corporation (NYSE: S) and received investment from Google and several cable operators. In just four years its fourth generation (4G) wireless broadband is high end and as of De 31, 2011, it has serviced 88 markets in the United States comprising a projected 134.2 million individuals. Along with this, its 4G mobile broadband networks have served an additional 131.9 million subscribers. Clearly, it has set itself up as an industry leader.

On October 19, Sprint became the biggest shareholder in Clearwire, controlling 50.8% interest in the company. Recently, the market went abuzz with rumors of Sprint reportedly weighing its options about acquiring the other 50% share that it still doesn’t own. These talks spurred a bullish momentum for investors, and Clearwire traded at an intraday of $2.78 with more than 6.4 million shares exchanged, giving a reliable clue that underlying stock price are expected to increase.

Sprint, likewise a leading wireless provider, is also the primary wholesale customer of Clearwire. Gaining full rights of Clearwire will enable them to have its own 4G network and access its ultra-high radio frequency  at 2.5 GHz, which is the frequency used in 4G 802.16e mobile WiMAX standard. Clearwire’s next-generation network currently reaches a third of the US. An upgrade in its technology is also planned to set the stage for a compatible technological platform. Despite their business partnership though, relations between these two big companies have always been without complications.

On December 6, Clearwire Corporation made public their agreement with Kajeet, Inc to provide young people with the capacity to connect with their parents and peers including other social, educational and community services the faster way using their 4G network. Investors clearly agreed on this move as it pushed share gains 11.67% to $2.68. Of notable advantage is Clearwire’s deep spectrum position in the industry which will allow them to easily add to their capacity as wireless data demand increases. It’s fast, simple, reliable, portable and affordable internet communications is a hit to their customers. As a result, it is currently trading above the 50-day moving average and higher than the 200-day moving average. Its stock’s 52-week low is $0.83 and 52-week high is $2.96. Within the last quarter, stock has gained 44.58%.

On December 11, as Clearwire’s NASDAQ stock rose, Sprint fell $0.09 cents to $5.57 on the New York Stock Exchange. Clearly both companies have much to gain in a merger as both have strengths to compensate for another’s weakness. Clearwire on one hand has long term debt in billions of dollars and continues to operate with financial losses. Its various assets in the most major US markets is its most vigorous point. Sprint on the other hand is also struggling against its larger competitors AT&T and Verizon Wireless, but sees an infusion of cash if Japan’s Softbank gets approval to purchase 70% of the company amounting to $20 billion. As each company lays aside its differences and focus on their prospects as an entity, the chance the deal will solidify is high. Otherwise, all could collapse and the rumored buy-out will go up in smoke, affecting gains for both company’s share. 

JosefRayDagatan has no positions in the stocks mentioned above. The Motley Fool has no positions in the stocks mentioned above. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. Is this post wrong? Click here. Think you can do better? Join us and write your own!

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