Clearwire (UNKNOWN: CLWR.DL ) today sent a letter to its stockholders urging them to vote for the merger with Sprint Nextel (NYSE: S ) , detailing the board's rationale for agreeing to Sprint's terms.
A special meeting for Clearwire shareholders to vote on whether to accept Sprint's offer of $2.97 a share, worth $2.2 billion, for the shares it does not already own will be held on May 21.
First, Clearwire said, its "stand-alone prospects are risky and highly uncertain" and the Sprint transaction would provide "a clear solution to the substantial funding gap Clearwire is facing." [Emphasis in original.] The company said that getting the $2 billion to $4 billion in additional funding it needs to stay in business while still building its LTE network was "uncertain."
Also, according to Clearwire, its business plan "is exceedingly risky due to increasing dependence upon Sprint, its largest customer," and getting another major wholesale customer was unlikely "given industry dynamics."
As far as the company's ability to sell excess spectrum, attempts in 2010 and again in 2012 to come to a deal "with a number of parties ... did not result in any compelling offers ..."
The letter concludes by stating that the company's "difficult liquidity situation will put it in a worse position to negotiate any other strategic transaction," putting it into the position of having to do a financial restructuring. To avoid that fate, Clearwire concludes, shareholders should vote for the proposed transaction.
The Clearwire letter, however, does not mention the complications presented by DISH Network's offer of $25.5 billion to buy Sprint, which itself is a counteroffer to Japanese telecom SoftBank's bid of $20.1 billion for Sprint.