Rainbow Princess will be a great companion for your daughters.

Happy New Year!

Since you are a value investor, what is your margin of safety investing in Clearwire?

Is the Margin of Safety related to this sentence from the above post (10/21/2011):

“…or you can write a $1 billion check to Clearwire, which is guaranteed
to bring in at least a billion dollars from Sprint next year, possibly
see a cash on cash return within 18 months, and own a piece of the most
attractive remaining independent asset in all of telecom on the eve of
the Great Spectrum Crunch.”…

and the calculated value of Clearwire’s spectrum as well as the assumption that Clearwire will be funded to expand to TDD LTE? If Clearwire is never funded with the required amount of money for TDD LTE, does your Margin of Safety for Clearwire evaporate?

Mike

Your analysis of Clearwire should make any company want to fund them immediately. Time is ticking but no funding is forthcoming yet except for allusions to it by Sprint (but no firm commitment). Do you have any thoughts on the conversations that could be taking place between Clearwire and any potential fund source (S, T, VZ, PCS, LEAP, GOOG, INTC, CMCSA, INTC, TWC, BrightHouse, Eagle River, DISH, T-Mo, AAPL, MSFT, etc.)?

Here’s a potential conversation between a potential funder and Clearwire:

“We’ll give you $1 Billion and you give us your spectrum holdings.” Just a guess.

Also, there may be an issue with a potential funder that Sprint owns so much of the company. Any funding to help Clearwire will help Sprint by default.

NOTE:
(I just read from FiberTower’s news announcement archives that Clearwire terminated early a service agreement with FiberTower in April of 2011 so a merger may not be so beneficial. It is interesting to note that FiberTower has a similar story to Clearwire; large portfolio of spectrum holdings 24GHz and 39GHz range, wholesale services to other providers and large debt load, their stock was as high as $150/sh. It looks as if FiberTower is in the process of heading into bankruptcy.)

Any thoughts on CLWR’s CEO (Prusch) comment that Clearwire may miss 12/1/2011 bond payment? Is this some type of strategy by CLWR or could they really be serious about choosing to not make the payment?  Do you see any similarity between FiberTower’s (FTWR) situation (they missed their 11/16 bond payment) and Clearwire? On 11/18/2011 there were user comments on Bloomberg that Clearwire and FiberTower may merge (FTWR was up 33% on 11/18/2011). Would this be a good combo?

Mike

With  the perceived value of Clearwire’s large spectrum holdings and the huge wireless data load dead ahead, one would think major players would be contacting Clearwire as soon as possible to have access to their spectrum and provide funding. Could the funding delay be caused by the pending/unknown outcome of the AT&T/T-Mobile proposed merger?I thought the following quote from a Fierce Wireless article (http://www.fiercewireless.com/story/3-factors-are-conspiring-against-clearwire/2011-11-04) summed up the Clearwire situation well:”It’s like Clearwire is holding the nation’s last glass of water, and the company can’t sell it even though the rest of the players in the market are dying of thirst.”
Mike

Here is the text of the article just in case it is not displayed fully from the link:

Can Wireless Spectrum Become Worthless?

By

Dan Radovsky
October 31, 2011

Radio frequency spectrum is a finite resource. It cannot be
created; it can only be parceled out. That’s what gives struggling
wireless telecom carriers value even in the midst of financial woe.
Their spectrum licenses keep gaining in worth in this world that craves
instant access to the Internet almost as much as it thirsts for oil.
Clearwire (Nasdaq: CLWR  ) , for example, which has been going through a “she loves me, she loves me not” financial crisis with its majority owner Sprint Nextel (NYSE: S  )
, has spectrum licenses that it listed in its second-quarter earnings
statement as worth $4.3 billion. In reality, though, those licenses
could be worth a lot more. In May 2010, Clearwire estimated their
open-market value at $20 billion, and J.H. Snider, president of policy
think-tank iSolon.org, put that number much higher, at $50 billion.
Here’s a look at the listed wireless license values of the major carriers:

Company

Wireless License Value (As Stated by the Company)

Clearwire
$4.3 billion

Sprint Nextel
$20.5 billion

AT&T (NYSE: T  )
$50.4 billion

Verizon (NYSE: VZ  )
$73.2 billion

MetroPCS (NYSE: PCS  )
$2.5 billion

Leap (Nasdaq: LEAP  )
$1.9 billion

Source: Latest available balance-sheet data from SEC filings.
Look what I found!I didn’t lie when I said spectrum is a finite resource. What I didn’t
say is that there still is some spectrum not being used. It’s called
“white space” spectrum, and it refers to the up-till-now idle
frequencies between television channels. This television white space,
which took up a large amount of the TV spectrum, was kept in place to
prevent signal intrusion between analogue television channels. But
over-the-air TV is now digital, which is much less prone to adjacent
channel interference. Hence, those white spaces may no longer be needed.
It’s a bird, it’s a plane. No, it’s Super Wi-Fi! That’s what some are
calling a technology that regulators in Europe and the U.S. are cooking
up to make use of this newly found spectrum. They see it as a way of
bringing broadband to sparsely populated areas without the high capital
costs of cabling.
The availability of more spectrum has also not been lost on the government. The recently created deficit supercommittee is even considering “incentive auctions” of the television white space as a new source of revenue.
But suppose …What if wireless carriers didn’t
need “licensed” spectrum anymore? That would certainly drain the value
away from those scarce but worthless licenses. This is not a far-fetched
supposition. Remember when the iPhone’s sudden popularity brought down
AT&T’s mobile broadband network? How did AT&T recover? It didn’t
buy more spectrum; the iPhones switched over to Wi-Fi to get their
data.
According to Harvard Law Professor Yochai Benkler:
“In the past year, Wi-Fi traffic on AT&T’s hotspots has tripled.
Today, about half of iPhone and 90% of iPad page views are carried over
Wi-Fi. Indeed, almost two-thirds of all smartphone and tablet data
traffic is carried over Wi-Fi rather than over the carriers’ networks.”
Unlicensed wireless is everywhere. It’s used at the E-Z Pass toll
booths. It’s used every time you fill ‘er up and pay with one of those
quick-pay fobs. Companies like Wal-Mart use unlicensed wireless to manage inventory.
According to Benkler, 70% of U.S. smart-grid communications and 80% of
health-care wireless needs are met by unlicensed wireless technologies.
And the second-largest mobile broadband carrier in Japan will be going
with a next-generation network that will be centered on unlicensed
wireless hotspots.
What would this mean?The first thing this could mean is that once-invaluable spectrum could lose its value. SpectrumCo, a partnership made up of cable companies Cox, Comcast (Nasdaq: CMCSA  ) , and Time Warner Cable,
paid $2.4 billion for wireless licenses at an FCC auction in 2006, but
it has never used those frequencies. Buying spectrum may have seemed
like a good investment to SpectrumCo at the time, but it could turn out
to be one of those collectibles that loses its desirability in the long
run.
Add all the companies mentioned here to My Watchlist.

Fool contributor Dan Radovsky owns shares of AT&T. Try any of our Foolish newsletter services free for 30 days. We Fools don’t 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.

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On November 01, 2011,
at 1:53 PM,
nivegulu wrote:

But then there
is the possibility of receiving TV channels on your phone by mistake if
you’re surfing for something else. The quality of service will suffer
due to “borderline interference (wave resonance theory)”. White space
just does’nt seem practical.

Report this Comment
On November 02, 2011,
at 1:52 AM,
nivegulu wrote:

It is the spectrum that delivers the Wifi hotspots.Because
the AT&T spectrum bandwidth is not wide enough that there are so
many complaints from the users on dropped calls, network hanging,
loading.. etc. The increased speed and volume needs of data on the
iphones, pads etc. simply just cannot be met on low depth bandwidth
spectrum (At&t) that delivers these sort of Wi-fi hotspots.

(I erased  one comment not related to the article.) Mike
 

Of the few people I have been involved in recruiting my big worry has been “do they do what it says on the tin” that is a risk. “Will they do what is asked of them” – that is a risk. With ex-military this risk is low. Can they do what is asked of them – that is also a risk but that is an across the board risk. And you think about it – so I employ a guy and I want him to do something – what do I have to do? Do I ask him, do I persuade him, do I incentivize him, do I threaten him, do I trick him, do I shout at him – and you think if I asked him to do something and he did it – well would that not be sort of straight forward and convenient.

Seems kinda low risk.

Alan

On your first point – yes, but that’s a good problem to have, no? And see that comment above…I completely glossed over wash sales rules on purpose here. More on that soon, tho. Thx.

Cale

Secondly, at least for personal tax loss harvesting, you can only claim the loss if you do not repurchase the position within 30 days.  Does the same restriction apply to the fund?  If so, averaging down can still be valuable, but there would need to be a lag between the sale and repurchase, in which case you are exposed to price changes in the interim.Am I totally missing the boat on this?!?

“The bottom line on the spectrum is that Clearwire has approximately four times Verizon’s spectrum, and it may be at least 50% more efficient, so that means six times. This makes all the difference in the world in terms of Clearwire’s ability to compete and to do so with competitive pricing.”

Here’s the link to the original story:

http://www.thestreet.com/story/10813139/1/clearwires-sweet-package.html