Saturday, May 5, 2012

"How about the Perfect Marriage. Clearwire and China Mobile. That would shake up the apple cart."

Dow Jones Industrial Average  13228.31 (UP)  Week ending 04-28-2012
                                                                                                                                                                    What if?  What if China Mobile (Symbol CHL, NYSE ADR), with it's deep $$ pockets, swooped in with a pile of cash and made a substantial investment in Clearwire (Symbol CLWR, $1.49) and it's siamese twin sister Sprint PCS (symbol S, $2.55). (Sprint owns 51% of Clearwire's stock.) 

Let's look at the numbers. 
Clearwire has a market cap of 1.89 Billion and Sprint has a market cap of 7.43 Billion for a total of 9.32 Billion $$.

Sprint has revenues of 34.1 Billion  and Clearwire revenues of 1.3 Billion for a total of 35.4 Billion $$. 

Sprint has 5.6 Billion in cash and Clearwire has 1.11 Billion for a total of 6.71 Billion in cash combined.
Long term debt for the two companies is 8 Billion. 

China Mobile Hong Kong Ltd. has 51.6 Billion in cash. So if they assimilate the cash and debt they could wrap up the whole deal for about 10.61 Billion net $$. This would make total sense and create a company that could functionally compete with Verizon Wireless and AT&T Mobility. Clearwire is sitting on the most spectrum of any carrier right now, and the Smart phone market and demand for data and bandwidth resources is exploding with growth. 

Don't want a foreign company owning a US Cellular carrier?
Well there is already a precedent for that. Vodafone owns 49% of Verizon Wireless.  How much would consumers love to see Verizon 
and AT&T have their world rocked with the likes of China Mobile getting up in their grill!  That announcement would really make a splash at the CTIA (Cellular Telephone Industry Association)  show next week in New Orleans.

Gordon Gekko
Oh, and what about that 700 Mhz. spectrum that Verizon Wireless is offering out ( i.e "taking the trash out to the curb") affecting Clearwire?

Nikola Tesla
Well unless Nikola Tesla is going to come back and invent some new amazing antenna technology for the 700 Mhz. band, the aforementioned  radio frequency will require an antenna as shown to the right like Gordon Gekko's old Motorola 8000 phone.  The smartphone toting crowd aren't going to like that too much!  This frequency is better suited to Industrial or Department of Defense type applications.

If your still not crazy about China Mobile as the suitor, then plug in another name like (Google, Oracle, Berkshire Hathaway, IBM, or any number of companies with allot of cash on their balance sheet.)

So my recommendation is to buy and hold Clearwire (Symbol CLWR, $1.52 per share)

Happy Cinco De Mayo!  Enjoy the 138th Kentucky Derby today at 5:00 PM EST.


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