Sprint/Clearwire merger speculation heats up

Like the Million Dollar Man teaming up with Virgil

Media rumors suggest Sprint Nextel and Clearwire may have come to terms on a merger that Canaccord Genuity Telecommunications Analyst Greg Miller continues to believe both companies desperately need in order to maintain their strategic positioning in the increasingly mature U.S. wireless marketplace. With over 100 Mhz of spectrum in most major markets, Clearwire can deliver the capacity that Sprint will surely need.

Conversely, as it's largest customer and primary source of funding that might keep it from a date with the restructuring process, Miller believes Clearwire needs Sprint more now than ever before. Although the combination would dilute Sprint’s near-term financial outlook, he believes that the combination of the two entities would create a far more powerful company than either is on a standalone basis. Although the ever-present possibility of a merger between Sprint and Clearwire has always created the fear of significant dilution to Sprint shareholders, Miller believes that with spectrum consumption accelerating, with the cash burn rate of Clearwire having declined dramatically and with the need to integrate the spectrum into Sprint’s reconstruction process (Network Vision) early on, such an acquisition should be well received by investors for both entities.

Sprint Nextel (S : NYSE : US$5.63), Net Change: 0.06, % Change: 0.99%, Volume: 43,581,982 Clearwire (CLWR : NASDAQ : US$2.75), Net Change: 0.07, % Change: 2.61%, Volume: 32,803,189

About the Author

Canaccord Genuity Inc. is a global investment banking and institutional brokerage firm. Their website is www.canaccordgenuity.com.

For disclosures of any equities mentioned here please see: http://www.canaccordgenuity.com/en/ODD/pages/disclosures.aspx.

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