Sources Say Sprint-MetroPCS Deal Less Likely

With Sprint Nextel (NYSE: S  ) and Japanese mobile operator SoftBank postponing their merger deal's formal SEC filing date by three more weeks, speculation had risen even higher that the U.S.'s third-largest mobile carrier was preparing to make a counteroffer to lure MetroPCS (NYSE: TMUS  ) away from T-Mobile USA.

However, such a play is not in the offing, says Reuters, after talking to several people in position to know.

The delay in filing the Sprint-SoftBank proxy statement/prospectus, according to Reuters' sources, was because of ongoing discussions Sprint was having with Clearwire (UNKNOWN: CLWR.DL  ) about interest payments. Sprint also had accounting questions in regard to its deal last month to acquire $480 million worth of spectrum from U.S. Cellular (NYSE: USM  ) .

Sprint said the delay was due to the complex nature of its deal with SoftBank.

The idea of Sprint trying to spirit MetroPCS away from T-Mobile was first floated in early October by several unnamed sources talking to Bloomberg.

That was the second time in a year that Sprint and MetroPCS were named as possible partners. Last February, Sprint's board of directors shot down CEO Dan Hesse's plan to buy MetroPCS for $8 billion. Either the board wasn't crazy about the then 30% premium over MetroPCS share price, or that the deal was pursued in secret -- or both.

But that was before SoftBank came along with its offer to buy 70% of Sprint, an offer that included a much-needed influx of cash -- $8 billion worth -- and Softbank buying up $12 billion worth of existing stock. That deal made a bid for MetroPCS look more doable for Sprint.

Even if no other developments come along to shake up T-Mobile's acquisition of MetroPCS by the time it is expected to finalize the middle of next year, that combined entity would still remain the nation's No. 3 mobile carrier in terms of subscriber size.

The Sprint/SoftBank deal is also expected to be complete by mid-2013.

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  • Report this Comment On December 07, 2012, at 1:44 PM, nivegulu wrote:

    SB/S needs to buyout just 25% more of Class A of CLWR plus 4 more BOD seats controlled by Clear in order to gain the 75+% total majority required for full spectrum ownership / control. That way Mc... can be "made whole" along with rest of common class A. Intel and Comcast can be bought out at a later date, if need be. Of course the caveat is that this incremental / creeping acquisition has to be at a price that reflects the true enterprise value (spectrum + IP patents + tower assets etc. less debt) of Clear.

    "Generally, companies that choose to have multiple classes of common stock issue two classes, usually denoted as Class A and Class B shares. Common practice is to assign more voting rights to one class of stock than the other. For example, a private company that decides to go public will usually issue a large number of common shares, but the occasional company will also provide its founders, executives or other large stakeholders with a different class of common stock that carries multiple votes for each single share of stock. Commonly, the "super voting" multiple is about 10 votes per higher class share, although occasionally companies choose to make them much higher. Usually, Class A shares are superior to Class B shares, but there is no standard nomenclature for multiple share classes - sometimes Class B shares have more votes than their Class A counterparts. Because of this, investors should always research the details of a company's share classes if they are considering investing in a firm with more than one class.

    Usually, the purpose of the super voting shares is to give key company insiders greater control over the company's voting rights, and thus its board and corporate actions. The existence of super voting shares can also be an effective defense against hostile takeovers, since key insiders can maintain majority voting control of their company without actually owning more than half of the outstanding shares.

    Voting issues aside, different share classes typically have the same rights to profits and company ownership. Thus, even though retail investors may be limited to purchasing only inferior classes of common stock for a given company, they still enjoy a proportionally equal claim to the company's profits. In these cases, investors see their fair share of a company's returns on equity, although they do not enjoy the voting power their shares would normally provide in the absence of dual classes. Provided the large stakeholders who own the disproportionate voting shares are successful in running the company, this should be of little concern to investors - especially the typical retail investor who has a very tiny stake in the company anyway. Normally, the existence of dual class shares would only be a problem if an investor believed the disproportionate voting rights were allowing inferior management to remain in place in spite of the best interests of shareholders."

    In the case of Clear I think class B holds the voting rights, so, why would they convert and lose control at the board level?.

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