Based on 2012 results, the combined company would have $24.8 billion of revenue and $2.7 billion of free cash flow. As of March of this year it has approximately 43 million subscribers. The deal terms were complicated including a 1 for 2 reverse stock split by MetroPCS, a cash payment of $1.5 billion to its MetroPCS stockholders and the proposed NewCo made up of T-Mo and MetroPCS acquiring all of T-Mobile’s capital stock from Deutsche Telekom in exchange for approximately 74 percent of MetroPCS’ common stock.

While the deal was approved by shareholders and regulators, the combined company still is trying to fight it out in a highly competitive and saturated mobile market. As my colleague Kevin Fitchard wrote when the deal was announced, this is a deal about beefing up T-Mobile’s spectrum so it can keep fighting Verizon and AT&T. Meanwhile Sprint, the nation’s third-largest carrier is in a deal of its own trying to buy Clearwire with cash provided by new partial owner Softbank.

It’s like a soap opera where everyone’s fighting for the airwaves. However, those fights are in the future, and today we just have to watch the stock and ponder what this means for the customer. Luckily, Fitchard already explained how this deal affects customers, so read that while you watch the stock.

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Sprint’s bid offers a 128 percent premium over Clearwire’s closing share price right before Sprint confirmed it was talking to Softbank about an investment on October 11. And it’s slightly more than the $2.90 a share Sprint offered last week, according to a regulatory filing. Softbank’s decision to invest $20.1 billion to buy a 70 percent stake in Sprint provided Sprint with $8 billion in cash, making the deal possible.

Here’s what Sprint CEO Dan Hesse had to say:

Today’s transaction marks yet another significant step in Sprint’s improved competitive position and ability to offer customers better products, more choices and better services. Sprint is uniquely positioned to maximize the value of Clearwire’s spectrum and efficiently deploy it to increase Sprint’s network capacity. We believe this transaction, particularly when leveraged with our SoftBank relationship, is further validation of our strategy and allows Sprint to control its network destiny.

As my colleague Stacey Higginbotham explained, the deal was all about expanding Sprint’s spectrum assets, which are critical as it competes with Verizon and AT&T. Clearwire’s 2.5 GHz airwaves are complementary to Sprint’s existing spectrum and should help it build out its LTE network:

For Sprint, which is building out an LTE network later than its rivals, capacity is key. The company is trying to free up as much spectrum as possible by getting some of its older Nextel subscribers off its older iDEN network technology. But with its investment in Clearwire, Sprint has access to many megahertz of spectrum –albeit in a band that’s not as ideal as the 700 Mhz and AWS bands that AT&T and Verizon own. Clearwire has more than 100 Mhz of spectrum in many of its markets. That’s roughly a third as much as AT&T and Verizon have in many of theirs.

Sprint has the unanimous approval of Clearwire’s board of directors as well as the blessing of Comcast Corp., Intel Corp and Bright House Networks LLC, who own approximately 13 percent of Clearwire’s voting shares. SoftBank also supports the deal, which is expected to close in mid-2013 along with the Softbank investment in Sprint.

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Sprint now has cash because of an investment by Japan’s mobile operator SoftBank, which spent $20.1 billion buying a stake in Sprint. As part of that purchase Sprint scored $8 billion in cash. Under the terms of the proposed deal with Clearwire, Sprint would pay $2.90 for the shares it doesn’t already own, which values Clearwire at $4 billion.

The rationale behind the deal is simple. Our growing demand for data means that mobile operators need the capacity on their networks to support their users. And that means they need spectrum — all those web pages hitting your iPhone travel over the spectrum. At the moment AT&T and Verizon have some of the best spectrum assets around, but even AT&T was trying to buy T-Mobile in order to get more airwaves.

Data from the FCC’s 15th Annual Competition report published in June 2011.

For Sprint, which is building out an LTE network later than its rivals, capacity is key. The company is trying to free up as much spectrum as possible by getting some of its older Nextel subscribers off its older iDEN network technology. But with its investment in Clearwire, Sprint has access to many megahertz of spectrum –albeit in a band that’s not as ideal as the 700 Mhz and AWS bands that AT&T and Verizon own. Clearwire has more than 100 Mhz of spectrum in many of its markets. That’s roughly a third as much as AT&T and Verizon have in many of theirs.

Not all airwaves are created equal, and Clearwire’s 2.5 GHz airwaves don’t have quite the range and ability to punch through walls of lower frequency spectrum. But with enough capital, Sprint can overcome those limitations and  build out a dense competitive network to ride the demand for data and keep its subscribers happy.

This deal is far from done given that SoftBank would need to approve it as well as Clearwire’s board and the FCC. The faster Sprint closes the deal, though, the sooner it can start shift Clearwire’s focus away for its older WiMAX technology and on to new LTE networks.

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Sprint lost 465,000 retail post-paid subscribers overall and saw its loss widen thanks to costs associated with shutting down its Nextel business. On a somewhat positive note Sprint is attracting new customers with the iPhone, the carriers said its iPhone sales were approximately 1.5 million — with 40 percent going to new customers. However, AT&T said it had activated 4.7 million iPhones during its third quarter call on Wednesday.

Photo courtesy of Shutterstock user Susan Law Cain

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LTE obviously won that race, and by returning to Baltimore with WiMAX’s competing technology Sprint is pretty much acknowledging it bet on the wrong the horse. Sprint is still offering WiMAX services through its partner Clearwire (which took over Sprint’s WiMAX assets in 2008), but only through its prepaid brands Virgin Mobile and Boost Mobile. The carrier’s 4G future is now clearly on the path of LTE, and we’ll talk more about that with Sprint’s CTO Stephen Bye at our Mobilize 2012 conference next month in San Francisco.

In addition to Baltimore, Sprint also expanded the LTE network to Gainesville, Fla. Ga.; Manhattan-Junction City, Kan.; and Sedalia, Mo.; following its clustering strategy. Sprint LTE is now in six big metro markets — Atlanta, Baltimore, Dallas, Houston, Kansas City and San Antonio – but it’s also turned up service in a dozen smaller cities and towns in the regions surrounding those big markets.

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The answer to that is to be determined. Light Reading surfaced this issue last week, and was told by a Freedom Pop representative that the company “should have more insights by launch later this Summer.” This issue isn’t unique to Freedom Pop, though, as it applies to all voice over IP calls. However, many such services can leverage a phone’s GPS chip or fall back to a 2G or 3G cellular network to assist with location. The iPod touch has neither capability, leaving Freedom Pop without a simple solution.

In the coming years, we’ll be transitioning all of our mobile calls from traditional cellular voice to IP-based communications; voice will simply become another data type on mobile broadband. That’s no secret and is why, according to EETimes, North American network operators are looking to get E911 support on LTE by 2014. That timeline may not be aggressive enough in the rest of the world for emergency location services though: On Wednesday, SK Telecom is set to turn on Voice over LTE, for example.

This doesn’t mean the FreedomPop sleeve for iPod touch is a bad product; heck, it’s not even in customers’ hands yet, so I can’t speak to the performance. However, if you’re thinking of cutting expenses by dropping your standard smartphone bill and going with the Freedom Pop sleeve, realize that you may be giving up your ability to dial 911 to have help find you. Let’s see what the company figures out for launch.

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After adding half a million new subscribers in the first quarter, Clearwire saw its customer totals dip by 42,000 in the second quarter. It’s not a huge loss, but at this stage of Clearwire’s development it’s one it can’t really afford. With only 11 million connections – the vast majority of them with Sprint – Clearwire needs to keep growing. It needs to demonstrate to its fleeing investors it has market-making potential, and it needs revenues not just for operations but to fund its future LTE network and long-delayed nationwide expansion.

Revenue-wise Clearwire is better off than the subscriber losses would imply. It renegotiated its wholesale contract with Sprint last year to guarantee a minimum of $1 billion in payments into 2013. So even as subscriber losses accelerate as more Sprint customers abandon WiMAX phones, Sprint will continue to pay the 4G carrier. Sprint has also begun selling WiMAX devices through its prepaid brands Virgin Mobile and Boost Mobile, which will help offset those subscriber losses.

Clearwire has been trying to cut its dependence on Sprint by signing other wholesale deals, but for every step forward it seems to take a step back. Partners and investors Time Warner Cable and Comcast have abandoned their plans to resell WiMAX and have instead chosen to partner with Verizon. Clearwire landed mobile virtual network operator (MVNO) deals with Leap Wireless, NetZero, Tucows’ Ting and FreedomPop. But Ting and FreedomPop have both indicated that they plan to move over to Sprint’s LTE network when it’s available, so Clearwire only gains temporary relief.

Clearwire’s retail business isn’t faring much better. Of its 11 million total subscriptions, 1.3 million are retail customers, a number that’s held steady for the last several quarters. Clearwire will have to find growth from somewhere or its crisis of confidence will only worsen. Already Google and Intel have sold their Clearwire shares, and pretty much every one of Clearwire’s original champions, save Sprint, has cut their ties with the suffering operator.

Image courtesy of Shutterstock user Linda Bucklin

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For those who won’t be in the Big Easy drinking from the wireless networking firehouse, here’s what NSN is so excited about and why it matters. The test showed off gigabit speeds on a TD-LTE Advanced network. Gigabit wireless demos are not new. Huawei has shown them off, as has NSN for the more traditional style of LTE-Advanced network that carriers like AT&T and Verizon will likely deploy. Today’s test was of TD-LTE, which Clearwire and other former WiMAX operators are planning to deploy.

Other than being of the TD-variant, the test also used the next generation of LTE standard called LTE Advanced. We don’t expect to see LTE-Advanced hit the market in a real way until much later this decade, although carriers are using some of the features associated with the standard to aggregate their spectrum. And speaking of spectrum, to achieve the blazing speeds of this test would require a lot more spectrum, much more power and uncrowded airwaves, so don’t wait up for those gigabit speeds. Anyhow, they’d totally bust through your data cap.

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According to the company, FreedomPop plans to discard every vestige of the traditional carrier business model and adopt the strategy of a Web startup. It’s not only giving away bandwidth but wants its customers to treat megabytes as a currency they can earn and trade. Instead of making its money through 4G access, FreedomPop is breaking one of the biggest carrier taboos: It plans to sell services over a free dumb pipe.

Turning 4G into a (nearly) free commodity

In an interview with GigaOM, VP of marketing Tony Miller laid out many of the pieces of FreedomPop’s intricate strategy that have so far gone unreported. The mobile virtual network operator (MVNO) is creating a social network as well as a 4G service; it wants to connect devices that have never seen mobile broadband connection; and it will sell value-added services on top of those connections, possibly even voice. Here are the details:

• FreedomPop plans to give a large block of data away for free. It’s targeting 1 GB at launch, though Miller said it may scale back or increase that allotment before it goes live in the third quarter. Miller said this wouldn’t be a onetime gimmick or promotion: The free bucket would kick in each month. As previously reported, FreedomPop will charge 1 cent for every megabyte over that free cap.

• The MVNO plans to make capacity a currency that customers can earn and trade. Customers will get bigger free data buckets for every customer they refer to the service. And in the future, Miller said, FreedomPop plans to make that capacity transferable. Say you’re running up against your 1 GB cap, but a friend who also happens to be a FreedomPop customer may be well short of hitting his cap. That customer can give you a portion of his free data allotment, allowing you to keep surfing gratis.

• FreedomPop plans to build a larger social network around those bandwidth-swapping capabilities. Customers will be able to form social communities tied to their device, sharing their location, status and other presence information with one another.

• The carrier plans to sell value-added services to its customers. Miller wouldn’t reveal the specific services, but he likened its strategy to the freemium model used by Internet companies: The core services — access and social networking features — will be free, but FreedomPop will layer on paid applications. Miller also said the company is considering launching its own VoIP service but had made no final decisions.

• While the WiMAX shell for the iPhone 4 and 4S has gotten the most attention, Miller said FreedomPop also hopes to launch this year with a mobile hotspot and USB dongle. The shell will act as a mobile hotspot distributing its mobile broadband connection to other devices through Wi-Fi, and it will run off its own battery, which can perform double duty as an iPhone charger. The company is also designing a shell for the iPod touch and in the future plans to connect other smart devices — and not necessarily just smartphones, Miller said.

How on earth will it make money?

Miller stressed that 4G access is only a minor part of the revenue equation. FreedomPop will get cheap WiMAX connectivity from its wholesale partner Clearwire, and it can afford to give most of that access away, he said. Customers who don’t use much data each month will cost FreedomPop little. Customers who consume a lot will quickly move into metered data, which allows the carrier to easily recover its costs.

The customer that poses a problem initially is the one that uses his entire cap each month without exceeding it, Miller said. Eventually those mysterious value-added services Miller referred to will turn those customers into profitable investments. Miller wouldn’t even give a hint as to what most of those services would be, though he did talk up the potential of VoIP.

“Speculatively this is something we would consider,” Miller said. “We’re not coming off the gate with a ‘cut the cord completely’ strategy. We’re launching first with mobile broadband. But down the road a VoIP service could be a possibility.”

Considering that Skype co-founder Niklas Zennstrom is spearheading the launch of FreedomPop through his venture capital firm Atomico, you would think VoIP has to be a strong consideration. Miller himself pointed to its planned launch of a WiMAX shell for the iPod touch, which FreedomPop or another over-the-top VoIP provider could easily turn into a softphone. “Some of these devices that were never meant to be phones can easily be transformed into them,” Miller said.

Miller also said FreedomPop will avoid the huge customer acquisition costs carriers face by taking the same viral marketing approaches as an Internet company. Its customers will beget more customers, drawing them in by the network’s social features and the promise of more free bandwidth. Miller said FreedomPop plans to grow the same way as Dropbox, which grew exponentially by rewarding referrers with more online storage.

“From an economics perspective, we need to look like a Web company,” Miller said. “That means customer acquisition costs can’t be $20 a pop.”

Will it work?

FreedomPop is turning the entire carrier business model on its head. In the data world, carriers have long tried to sell services, but for the most part they have become dumb bit pipes. By giving away access and focusing on services, FreedomPop may well succeed where the operators failed. But it’s also taking a big risk.

FreedomPop is betting its services will somehow be more appealing than any other over-the-top services available through an open broadband connection. It could block access to alternate VoIP providers or whatever the over-the-top equivalents are to its other unnamed services, but then it winds up playing the carriers’ game. But if it does provide unrestricted access to anything and everything out there on the Web and in the iPhone app store, its customers might just take the free data and run.

Sign image courtesy of Flickr user frankh; commodities image by stock.xchng user Lotus Head

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Sprint hasn’t shared any official news on the Galaxy Nexus, but it makes sense that the carrier will sell the handset. It’s a flagship model that offers a large 1280 x 720 resolution touchscreen, dual-core processor and Google’s newest version of Android. Since Samsung already makes an LTE version for Verizon, it shouldn’t prove to difficult to make one for Sprint that uses a different radio frequency.

One key difference I anticipate is full support for Google Wallet, which I find to be a superb way to pay for things with my own Galaxy Nexus; I ordered an unlocked GSM version of the device late last year. Sprint previously partnered with Google to make use of the NFC chip in the Nexus S handset for the Wallet service. The Galaxy Nexus also has NFC-capability and it works well. Verizon’s Galaxy Nexus doesn’t officially support Google Wallet, mainly because the carrier is a joint partner with AT&T and T-Mobile for a competing payment service called Isis.

Sprint was the first major U.S. carrier to move beyond traditional 3G mobile broadband, partnering with Clearwire to build out a WiMAX network which launched in 2008. Other carriers eventually settled on the more global LTE standard, however, and Sprint plans to pursue the same path. The carrier plans to launch LTE on its 1900 MHz spectrum by mid-2012 and at that time, I’d expect the Galaxy Nexus handsets will be able to use it.

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