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Clearwire to Investors: Please, Come Back!

Clearwire (Nasdaq: CLWR  ) is running out of sugar daddies.

Time Warner Cable (NYSE: TWC  ) is unloading its 7.8% stake in the mobile network operator. According to SEC filings, Time Warner exchanged all 46 million of its Class B Clearwire shares for Class A stock. That move is an obvious preparation for selling off Time Warner's interests in Clearwire, since there is no market for Class B interests but Class A stubs can be traded on the NASDAQ.

So the entire load of not-so-restricted Class A shares is presumably for sale on the open market now.

Time Warner still holds a small, indirect interest in Clearwire through regional cable subsidiary Bright House Networks, which owns 8.5 million Class B shares for a 0.6% stake of the company's total votes. Sprint Nextel (NYSE: S  ) remains the largest Clearwire investor by far, owning 48.3% of the votes outright.

But Sprint considered giving up 77 million shares in the second quarter and Google (Nasdaq: GOOG  ) liquidated its entire load of 29 million shares in the first quarter. Like I said: Clearwire is running out of rich friends.

And it's not like Clearwire couldn't use some investor cash at the moment. The company is busy supplementing its WiMax 4G network with another operation based on the competing LTE 4G standard. All that hardware is expensive. For now, Clearwire can only commit to supporting LTE phones in "densely populated urban areas." The rest of the country will have to wait until Clearwire can afford to go there.

Oppenheimer analyst Timothy Horan notes that Time Warner cares less about Clearwire's network now that the cable company has an agreement with Verizon (NYSE: VZ  ) in place. "We ultimately believe that Sprint will gain control," Horan says, but the dilution from such a takeover is not accounted for in Clearwire's current price.

In other words, look out below even after Tuesday's 12% price drop. Shares have plunged 41% over the last 12 months, but the bottom still lies ahead.

Mobile communications is still a vibrant market, but Clearwire is missing the boat. However, there's one surprising stock poised to make the most of this trillion-dollar revolution.

Fool contributor Anders Bylund owns shares of Google but holds no other position in any of the companies mentioned. Check out Anders' holdings and bio, or follow him on Twitter and Google+. The Motley Fool owns shares of Google. Motley Fool newsletter services have recommended buying shares of Google. The Motley Fool has a disclosure policy.

We Fools may not all hold the same opinion, but we all believe that considering a diverse range of insights makes us better investors. Try any of our Foolish newsletter services free for 30 days.

Read/Post Comments (3) | Recommend This Article (1)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On September 19, 2012, at 12:40 PM, cjmac136 wrote:

    The most likely reason you are NOT IN BUSINESS is because you allow uninformed articles like Clearwire to Investors: Please, Come Back!

    Just a few comments on the poorly done piece:

    1.) The reason TWC is selling its shares (using your same wording) is presumably because they want the spectrum sale and joint marketing deal with Verizon to be approved by the FCC, which received a letter from Direct TV explicitly asking for the divestiture of Clearwire by all the cable companies because it hinders any investment or deal by other interested parties in Clearwire.

    2.) Sprint considered selling the 77 million shares so they could stay below a 50% ownership of Clearwire and not be required to report Clearwire operations on its books, thus avoiding some of its own debt restrictions which Sprint creditors have on loan agreements for Sprint.

    3.) The transition Clearwire is making to LTE 4G, requires mostly software updates with few hardware changes or tower climbs, allowing the lowest possible cost in the telecommunication industry for a 4G upgrade. The low cost transition is only possible because Clearwire has the most modern existing network already in place, in the form of WiMax, which Sprint currently uses through an agreement with Clearwire to offer unlimited urban area 4G connections, unlike Verizon or AT&T which don’t offer unlimited data plans.

    4.) Lastly, there would be NO dilution if there were a Clearwire takeover, as a takeover requires outstanding stock to be purchased by the acquiring company, which means dilution is impossible.

    The only boat missed was by the author, who has no understanding of Clearwire and apparently little understanding of what dilution means in the investment community. And now you know why “The Motley Fool is NOT IN BUSINESS at the moment... “


  • Report this Comment On September 19, 2012, at 1:29 PM, spokanimal wrote:

    cjmac136 only touched the surface in terms of the poor quality of this Motley Fool Piece.

    No mention of Dish's big investment in clearwire bonds... the players aren't leaving... they're just changing according to the alliances they're forming.

    Similarly, you would think that Horan, or the author, would be cognizant of the rights associated with Craig McCaw's 30 million shares and his say over major, organizational issues affecting the company.

    We knew when Time Warner first teamed up to form the Verizon deal that they would jettison their clearwire shares once it was approved...

    ... the downdraft in the price of the stock that resulted from the announcement reflects the average investor's ignorance of the complexity of this company as much as it reflects the supply of shares coming onto the market.


  • Report this Comment On September 19, 2012, at 3:04 PM, lbtoolman wrote:

    Once again an article written by a true FOOL! What a useless piece of crap. No fact checking, just pure opinion used to mislead the investing public!

    There is no dilution in a takeover! You are not only a Fool, but an IDIOT!

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