The idea of Google actually buying Sprint was floated, humorously by a US columnist this week, and we thought it worth addressing for a second just to ensure no-one takes it seriously.
Google has talked about spending perhaps $4.5 billion to acquire spectrum in the forthcoming 700 MHz auctions, not ten times that amount for an operator that although it is the finished article, in that it has a network with customers, and not just spectrum, brings with it inherent problems with profitability and growth.
The truth is that Google can get everything that it wants from Sprint by waiting until the clearly confused and terrified board appoints a CEO to their liking that comes complete with a commitment to take away the burden of building out its 2.5 MHz spectrum. If that spectrum is transferred to some form of joint venture that Sprint may benefit from at some point in the future, but which carries with it no burden of further expenditure, possibly through an entirely new type of deal with a company like Clearwire, then Google can part fund such a deal, alongside players like Intel and Motorola.
If the total build out is as high as $5 billion and all of that has to be in place prior to revenue arriving (which it won’t) then Google might have to spend perhaps half of that $4.5 billion to get its way, not ten times the amount.
The columnist said that certain people had been whispering in his ear, and that this is where the idea came from. Except that it’s pretty obvious that the people whispering in his ear are Sprint shareholders, trying to come up with improbable ways to inflate the stock ‘ a common practice for desperate investors.
The very best that Sprint shareholders could hope for is that Google puts in some money to help build the network, along with vendor finance from Motorola and Intel, in return for usage privileges that go forward into the future ‘ such as all advertising rights on the service. Once again Google can get what it wants that way for around half of that money it has set aside for spectrum, not ten times the amount.
Right now the board of Sprint would be too terrified even to meet with Google, never mind cut a deal, and if they put in a CEO in their own image, then they would be better off calling up the deposed CEO and offering him his own job back.