For Once, Clearwire's in the Driver's Seat

With all the hullaballoo over DISH Network's (NASDAQ: DISH  ) recent offer to buy Sprint Nextel (NYSE: S  ) , one has to ask where does that now leave Clearwire (UNKNOWN: CLWR.DL  ) , which is being wooed by Sprint?

The answer: In a pretty good position, actually. Thank you for asking.

DISH still wants Clearwire -- lock, stock, and spectrum -- only now instead of trying to do so through a bidding war with Sprint, it thinks the odds are better if it just goes ahead and buys Sprint, which happens to own a majority of Clearwire's shares.

But DISH isn't the only suitor for Sprint. Late last year, the Japanese telecom SoftBank agreed to buy 70% of Sprint for $20 billion, and it was the cash portion of that deal -- $8 billion -- that gave Sprint the wherewithal to make the offer to buy the outstanding shares of Clearwire it did not already own.

However, SoftBank, a $50 billion company, may be able to outgun DISH, an $18 billion company, in a bidding war. But if SoftBank's deeper pockets can produce more than the $25.5 billion DISH has offered for Sprint, DISH chairman (and former professional gambler) Charlie Ergen thinks he has an ace up his sleeve.

Playing the foreign card
Because SoftBank is a foreign company, Ergen feels the Department of Justice will not look favorably toward it acquiring a major U.S. telecom. Ergen also has asked the Federal Communications Commission whether it is "in the public interest for a foreign company to control more spectrum below 3 GHz than any one other company in the United States," as it would by acquiring Sprint and Clearwire.

Enter the Big Red dragon
And another suitor for Clearwire (or at least for some of its spectrum) has entered the picture. On April 8, Verizon (NYSE: VZ  ) made an unsolicited, non-binding proposal to acquire some Clearwire spectrum leases for $1 billion to $1.5 billion. However, the terms of the Sprint-Clearwire merger agreement prohibit Clearwire from selling spectrum leases without Sprint's consent.

Clearwire has come a long way from December of 2011 when it threatened to default on paying the $237 million of interest on its $4 billion in debt just to get Sprint to make a commitment. At the last minute, Clearwire's game of chicken worked, and Sprint ended up giving Clearwire a deal with funding worth $1.6 billion.

The vote on whether Clearwire will go ahead with Sprint's proposal will occur on May 21 at a shareholders' meeting. It looks like Sprint will be looking for Clearwire to give it a little love for a change.

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Read/Post Comments (2) | Recommend This Article (1)

Comments from our Foolish Readers

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  • Report this Comment On April 29, 2013, at 10:40 PM, ddeleo wrote:

    1.) Sprint is illegally (conflict if interest) forcing Clearwire to chose their credit loan deal over the better terms offered by another company. They do this because they have right of refusal. By doing this they gain more swing votes each month Clearwire dips into that noose called a credit loan. So by December they don't need a Clearwire minority vote to win/steal Clearwire. The conflict of interest is shown visibly by a companyA denying CompanyB from selecting the credit loan with the better terms. Why would that be? Is the SEC blind or a wet noodle.

    2.) Clearwires board of directors have major stock options to gain only if Sprint buys Clearwire. If you are a board of directors on Clearwire how would you vote. Another conflict of interest so apparent its almost cartoonish.

    So if Clearwire was in the driver seat it would first suggest the people who run Clearwire are not steppford wives following SPRINTS carrot. It would suggest they are capable of making simple logical fiduciary decisions such as being free to pick the credit offer with the best terms.

    If I am the only one to comment on this article its because everyone else had the good sense to not take it seriously because it does not deserve to be.

  • Report this Comment On April 30, 2013, at 12:44 AM, spokanimal wrote:

    Softbank is a foreign company looking to acquire it's own, foreign subsidiary in the U.S. It's ability to do more than just pump a ton of cash into making sprint competitive is non-existent.

    As a U.S. company that sits in the middle of an array of satellite transmission and a ton of content, Dish is uniquely positioned to build alliances with a host of U.S. companys that can combine their resources to empower Sprint/Dish/Clearwire in a way that softbank could never do...

    ... in addition to potentially combining financial resources in partnership to trump any bid softbank might bring to the table.

    Finally, as the ultimate author of sprint's ridiculous, $2.97 offer for clearwire, Softbank is the owner of almost as much wrath on the part of clearwire's minority shareholders as Dan Hesse is after years of hammering away at clearwire and manipulating it's stock into the proverbial sewer...

    ... Charlie Ergan is eons ahead of Mr. Son when it comes to closing the deal with clearwire because he's the one guy who hasn't thrown arsenic into the waters.

    Sprint's ridiculous $2.97 bid for clearwire is dead. They need to cancel the May 21st meeting and start acting like adults instead of the barbarians that they are.


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