Shake-Up In 4G LTE Market Creates Long-term Investment Opportunies: Verizon Communications Inc. (VZ)

Long Term Evolution, or LTE, is a 4G wireless broadband technology developed by the Third Generation Partnership Project, or 3GPP, an industry trade group. 4G LTE technology offers faster data transfer, as compared to existing 3G networks, by using radio waves over the same bandwidth. LTE technology is designed to be scalable and not clash with 3G services while using the same infrastructure for their functions. 4G LTE is expanding fast in 2013, and is expected to be booming in the next few years. 5 companies, including China Mobile (NYSE:CHL), Clearwire (NASDAQ:CLWR), Sprint Nextel (NYSE:S), Nokia (NYSE:NOK), and Alcatel-Lucent (NYSE:ALU) will benefit from fast expansion of 4G LTE in the next few years.

There are two types of LTE: TD-LTE and FDD-LTE. TD-LTE has been tested in France, Ireland, Poland and is currently aggressively deployed in China. Networks in Germany, Austria, Scandinavia and the Baltic use FDD-LTE. Verizon Wireless, owned by Verizon Communications Inc. (NYSE:VZ) and Vodafone Group Plc (ADR) (NASDAQ:VOD), also uses FDD-LTE in the United States.

TD-LTE

For TD-LTE, the expansions are led by China Mobile Ltd. (ADR) (NYSE:CHL)​ in China and Clearwire in the United States. Clearwire intends to have its first wave of TD-LTE 5,000 cell sites up and running by June, 2013. Clearwire has been working with Sprint Nextel , its majority owner and the largest wholesale customer, to identify sites for Clearwire’s planned TD-LTE network. Clearwire plans to deploy its LTE Advanced-ready TD-LTE network mainly in urban areas, where the traffic is heaviest. Softbank’s $20B take-over deal of Sprint Nextel is progressing despite the delay by Dish Network, the Department Of Justice, and the FCC. As reported on February 9, 2013:

“Federal Communications Commission is moving ahead with its original timetable for reviewing SoftBank’s proposed $20 billion acquisition of Sprint Nextel – dismissing Ergen’s request for a “pause” while Dish pursues a deal for Sprint partner Clearwire.”

Despite Dish Network’s objection, the FCC is moving ahead with its review, putting Sprint and SoftBank on target to pull off the complex deal in June or July 2013. The FCC is expected to finish the review within 180 days. Industry experts also expect that Softbank will be able to alleviate concerns and win DOJ approval. It would be in Sprint’s best interest to complete the deal as soon as possible. Sprint just reported losses of $1.3B in Q4, 2012 on February 7. The company needs to focus on its long-term turnaround efforts, and to expand its network to 4G LTE via a Clearwire buyout with Softbank’s capital backing. On February 6, 2013, Softbank announced plans to sell up to $3.2B in bonds to help fund the acquisition of Sprint.