Sprint is in a difficult spot and must buy Clearwire if the carrier wants to be competitive in the 4G market, according to analyst Patrick Comack of Zachary Investment Research. The wireless carrier is faced with increasing pressure over the possible acquisition of T-Mobile by AT&T. Such a merger would put Sprint far behind its competitors Verizon and AT&T in terms of subscriber numbers.
To bolster its market share, Sprint needs to step it up a notch in the 4G mobile broadband market. Currently, the wireless carrier has partnered with Clearwire and uses WiMAX for its 4G solution. This is all and good except Clearwire is struggling financially and has slowed its network rollout, trimmed its work force and sold off debt to generate enough capital to keep afloat. Unfortunately, Clearwire is sliding down, while Sprint desperately needs to be moving up.
To guarantee its 4G network will be competitive, Comack suggests Sprint should buy Clearwire and save the struggling company before it implodes. If it chooses to pass on Clearwire, the wireless carrier msut abandon WiMAX and quickly move ahead with LTE or some other flavor of 4G. This may sound like a drastic measure but this is do or die time for Sprint and it must move forward now before Verizon and AT&T become the two dominant carriers in the US following the T-Mobile merger.
Comack believes the now #3 carrier will take the prudent route and look to acquire the 4G provider. Based on this assumption, Comack downgraded Sprint to sell and upgraded Clearwire to neutral.
[Via WSJ]