NEW YORK ( TheStreet) - After AT&T (T - Get Report) unveiled an ambitious $22 billion-a-year capital spending plan earlier in December, it took less than a week for industry also-ran Sprint (S) to jump on the bandwagon, according Craig Moffett, a telecoms analyst at Bernstein Research and a noted industry bear.
Early on Thursday, Sprint offered to buy a remaining 48% stake in 4G wireless broadband service Clearwire (CLWR) for $2.90 a share, or roughly $2.1 billion in cash. While the proposed deal would cement a long-expected takeover drama and turn Clearwire into one of the top arbitrage trades of 2012, the bigger implication may be on Sprint.
The deal may signal Sprint is poised to dramatically boost its capital spending in coming years, after being the thriftiest of players in a telecom sector marked by the big ticket wireless spending plans of AT&T (T - Get Report) and Verizon (VZ - Get Report). For Sprint investors and, most notably, Softbank - the Japanese investing conglomerate that just announced a deal to buy the company - a bump-up in spending may come as a surprise and hit bottom line earnings metrics.
"Perhaps the biggest take-away from the announcement this morning that Sprint's Board of Directors has authorized a take-over of the remaining 49% of Clearwire is this: Sprint's capital intensity will rise," wrote Moffett, in a Thursday note to clients.Now that Sprint is unequivocally placing its network bets on Clearwire, the issue is the corresponding spending needed to convert the service into a national 4G option. Notably, Clearwire's 2.5-GHz spectrum will require significant cell tower spending - roughly double the lower band spectrum of MetroPCS (PCS)- T-Mobile - to reach a nationwide audience, according to Moffett's calculations. "