Should Clearwire Accept Sprint's Buyout?

Despite the bright future predicted for the outcome of Sprint Nextel (NYSE: S  ) taking over Clearwire (UNKNOWN: CLWR.DL  ) , not everybody is cheering the proposed deal on.

A possible stumbling block with the potential for halting the merger is -- paradoxically -- related to Clearwire's clearest asset: its spectrum. Some Clearwire shareholders think the $2.97 per Clearwire share offered by Sprint is too little by far.

In November, when the first rumbles were felt of a newly cash-infused Sprint buying out the almost 50% of Clearwire it didn't already own, one major Clearwire investor expressed displeasure, believing that the company was selling itself too cheaply.

In a letter to Clearwire's board of directors, one also made public in a press release, Mount Kellett Capital Management said it felt "Clearwire's stock to be substantially undervalued." Mount Kellett owns 7.3% of Clearwire's shares.

Mount Kellett felt that instead of selling itself off, it should sell off some of its most valuable asset -- its spectrum -- and use the proceeds to finish building out its 4G LTE network. Selling its excess spectrum could "generate gross proceeds of $6-$9 billion" Mount Kellett estimated.

That price Sprint would be paying for the remainder of Clearwire would be $2.2 billion.

Mount Kellett now has some company in the "don't sell" camp. According to Bloomberg, activist investor Crest Financial said it increased its share in Clearwire from 6.62% to 8.34% to try and block the sale to Sprint.

Sprint has support for the sale from shareholders holding 13% of Clearwire. It needs 24.8% to ensure the deal going through.

Just how valuable is the spectrum held by Clearwire? Whether it's worth what Mount Kellett says or not, it is certainly a prize.

According to Recon Analytics founder Roger Entner, adding Clearwire's spectrum to its own would make Sprint the largest U.S. spectrum holder. Out of the 547 MHz of useable mobile broadband spectrum available, Sprint would hold 200 MHz, as much as Verizon (NYSE: VZ  ) and AT&T (NYSE: T  ) combined.

And that raises another possible problem for Sprint. Even if the opposing shareholders can't garner enough shares to stop the buyout, would the FCC allow such a concentration of spectrum in the hands of just one entity?

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  • Report this Comment On December 19, 2012, at 6:48 PM, soundblaster16 wrote:

    Here in Canada, we used to have something

    called 'Crown Corporations' until PM Brian

    Mulroney put a "for sale" sign on Canada,

    scrapped the National Energy Policy of the

    Trudea administration, and basically permitted

    "greedy socially irresponsible sodomites" to

    buy up Crown Corporations and begin raising

    prices on everything from telecom to electricity

    and water... Some firms are natural monopolies,

    and arguably they should be funded with tax

    dollars, and their services priced at cost, because

    they create much benefit to the rest of the

    economy... Imagine running a business without

    a phone, or electricity, or being denied water

    because you cannot afford it. Ever hear of

    water-born diseases such as malaria? Now, even

    with Crown Corporations, many First Nations'

    people, living on reservations had to deal with

    muddy tap water from their kitchen sinks... It is

    a cruel, and socially irresponsible world out there.

    According to the Bible (KJV), the world is a HE,

    and the Church is a SHE... Hmm, a gentler, kinder

    nation? Too many males, and females, are very

    worldly.... That said, the value of the wireless spectrum assets

    of Clearwire are

    growing, as data congestion on the wireless

    networks of Verizon and AT&T continue to grow...

    Buses... Why should citizens have to pay "exact

    change" and not ride on those buses for free?

    Do not the tax dollars pay for that PUBLIC service?

    So, why are they run as if they were private

    businesses, and charging they who wish to

    "catch a ride"? ... FOOD FOR THOUGHT. Debate

    amongst yourselves.

  • Report this Comment On December 19, 2012, at 8:36 PM, spokanimal wrote:

    Sprint spent 2 years creating controvery and pessimism en-route to driving Clearwire stock to a price that would enable it to gobble up clearwire's immensely valuable spectrum fore mere pennies on the dollar.

    There was nothing fiduciary ABOUT this... it was pure manipulation on Sprint's part in an effort to enrich itself at the expense of minority shareholders.

    Intel is also a minority shareholder, but has obviously capitulated to Sprint because it's better for intel to accept the $2.97 offer than risk future business opportunities with sprint/softbank... again, a "conflict of interest" that renders other, victimized minority shareholders powerless.

    I've seen a lot of class action lawsuits over the decades, but never one with the substantial merits of this one...

    ... America is no place for corporate larceny of this magnitude. I urge ALL clearwire shareholders to stand up to these people, vote AGAINST this merger, and join the ensuing class action.

    Spokanimal

  • Report this Comment On December 19, 2012, at 8:57 PM, SuntanIronMan wrote:

    Why not? The struggling Softbank buys the struggling Sprint. And the struggling Sprint buys the struggling Clearwire. They are all perfect for each other, haha.

    @spokanimal

    "clearwire's immensely valuable spectrum fore mere pennies on the dollar."

    Except Clearwire's spectrum holdings in the 2.5 GHz band is kind of crappy. Any band of usable spectrum is worth something to someone at the right price, but I wouldn't say Clearwire's 2.5 GHz holdings "immensely valuable".

  • Report this Comment On December 20, 2012, at 1:34 AM, ddeleo wrote:

    If someone could explain the following to me please... If the offer from SPRINT to buy Clearwire is 2.2b, how is that much more than what SPRINT would owe Clearwire anyways based on the contract they signed with them to pay $1b a year for the next two years flat fee to use Clearwire network. And then after that through 2016 a pure usuage fee. If the board and the public know that SPRINT owes them $2b in two years, why the hell would the board go along with believing $2.2 is a fair price to buy the entire company. Basically instead of SPRINT paying over $8 billion through 2016 to use Clearwires network, they give them $2.2 billion and get to ride it for free for decades. I'm not clear on how the Clearwire board does not see themselves as being played like school children by SPRINT. Just doing future earnings analysis from what SPRINT would owe Clearwire would tell you the company is worth so much more and I'm not even an accountant.

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