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.
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.
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.