Sprint's spectrum assets provide a compelling backstop to value

Implications: The book value of Sprint's spectrum assets is likely understated, given the robust results in the 700 MHz auction and the emerging value of Sprint's vast 2.5 GHz holdings.

Analysis: There is little doubt that Sprint has horribly botched its merger with Nextel.  However, there's a good argument to be made that Sprint is actually trading below liquidation value.  Consider:

Sprint's market cap as of 2/2/08 is $29.7B. 
Sprint's LT debt as of 9/30/07 is $21.7B. 

The Book Value of Sprint's spectrum holdings as of 9/30/07 is $20.5B, or roughly 40% of Sprint's EV and 66% of its market cap. 

Now, consider the 700 MHz auction, which as of 2/2/08 has reached over $18B in bids for 50 MHz of spectrum nationwide (not counting the public service-laden D group). That's roughly $1.25 per MHz POP -a number that will likely go higher - for spectrum that isn't even going to be commerically available for another year or so.  While there are propagation differences between 700 MHz and Sprint's holdings (primarily 1.9 and 2.5 GHz), these results raise the bar on Sprint's spectrum holdings.  When the company's accountants mark its spectrum to market in the next quarter, the spectrum line on the balance sheet should increase significantly.  

On a more detailed level, it's a fair bet that Sprint is not assigning much book value to its vast 2.5 GHz spectrum holdings, which it plans to use for WiMax.  Sprint has about 2-3 times the number of MHz POPs at 2.5G as are being auctioned currently at 700 MHz, yet I'll bet Sprint has them on the books at pennies a MHz POP.  While the 2.5 band has a messy licensing scheme, Sprint and Clearwire have brought some real value to the band by rolling it up to the point where 95+% of the entire band is controlled by one of those two companies. 

With spectrum assets alone constituting a hefty chunk of Sprint's value, there's little being assigned to its 50M+ customers and network infrastructure.  You've got to believe there is some interest, particularly from abroad, in picking up this collection of assets at anything approaching today's prices.