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The official announcement of the immediate departures of CEO Bill Morrow, Chief Commercial Officer Mike Sievert, and Chief Information Officer Kevin Hart doesn't use the word "housecleaning," but it may as well have. Even so, problems remain.
Speculation over how and when Clearwire will raise additional funds remains unresolved. So does a pricing dispute with Sprint, which controls 531.7 million B-shares of Clearwire stock representing roughly 54% of the voting power. This is Sprint's company, and apparently it didn't like the direction Morrow was heading.
But again, this assumes Clearwire was headed in a definable direction. That may not be the case. Last fall, Bloomberg and others were reporting that Clearwire was in discussions to sell up to a third of its inventory of wireless spectrum to interested carriers for as much as $5 billion. AT&T (NYSE: T ) , Verizon (NYSE: VZ ) , Deutsche Telekom, Time Warner Cable (NYSE: TWC ) , and Sprint were all named as potential bidders. We've yet to see a deal.
Then, last month, Morrow said during Clearwire's earnings call that he and his team were still evaluating "attractive" bids and that a decision would be made during the second quarter, roughly a year after the hand-wringing began.
Before you call Morrow indecisive, consider a couple of possibilities. First, the delays may have as much to do with Sprint being unwilling to hand spectrum over to a competitor than anything else.
What if Morrow had rich offers from the likes of T-Mobile and Verizon? Verizon, in particular, has been criticized for serving its new iPhone customers with slower-than-expected download speeds. More spectrum could allow for a welcome network upgrade, akin to arming the enemy in the middle of a shooting war.
And yet, as CEO, Morrow's duty isn't to serve Sprint but to serve shareholders who might benefit from a multibillion-dollar asset sale. Sprint, conversely, has its own business and shareholders to think about. The carrier's refusal to pay higher wholesale distribution rates to Clearwire could be its way of exerting leverage as the majority owner. Morrow may have been stuck. Kowtow to Sprint, or find the door.
Nothing in Clearwire's public statements says this is the way it went down. To the contrary, actually. In the press release announcing the appointments, Clearwire said that the changes wouldn't impact its wholesale pricing dispute with Sprint.
Maybe, but there's also nothing in the release about an unstated disagreement over a spectrum sale. All we know for sure is that Chairman John Stanton will take over as CEO temporarily. CFO Erik Prusch will become chief operating officer.
My guess is these two will be more likely to make Sprint happy, which in turn probably means the end of the wholesale spat and negotiations to sell spectrum. So be it. Just the process of soliciting bids has yielded benefits. We now know that Clearwire's key asset (i.e., spectrum) could be worth as much as $15 billion in a sale, or more than four times the company's current enterprise value.
In the end, giving in to be Sprint may be the better deal for investors -- higher wholesale prices are better -- but it virtually guarantees additional dilution as Clearwire uses equity to raise cash to expand its network. The housecleaning may be over, but there's plenty of home improvement work left to do.
Do you agree? Disagree? Let us know what you think about Clearwire's prospects, strategy, and valuation using the comments box below.
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