Dish's Clearwire bid may be indirect route to Sprint
Satellite TV player tops Sprint's offer for Clearwire, at $3.30 a share, but success unlikely unless compromise is reached
Published: 9 January, 2013
Clearwire investors, whose opposition to full takeover by Sprint has been mounting, have their wish - a rival bid, from Dish Network. The ambitious pay-TV player, which recently received FCC permission to build an LTE-Advanced network in its mobile satellite spectrum, has made no secret of the fact it needs a partner, and a tie-up with Clearwire has often been mooted. Now it is seeking to gazump Sprint, topping its bid of $2.97 a share with an offer of $3.30, valuing the WiMAX/LTE firm at $5bn. However, its real end game may be to pressurize Sprint into including Dish in its 4G plans, which will be backed by Japan's Softbank.
Clearwire has not said whether it will accept the higher offer, but a bidding war will almost certainly ensue, since Japan's Softbank, itself looking to acquire 70% of Sprint, is enthusiastic about Clearwire's substantial spectrum resources, while Clearwire shareholders want more money for their spectrum. The battle will certainly address the investors' claims that Sprint was badly undervaluing those assets in its initial bid, but could create further uncertainty about the US's 4G operator landscape - and while the second-tier players scrabble to buy the owners of spectrum and networks, the big two will build on their initial LTE headstarts.
Dish's unsolicited offer is conditional on the satellite firm acquiring just 25% of Clearwire's stock - it would pay about $2.2bn for 24% of the start-up's spectrum, and the transaction would require shareholders to sell at least 25% of the stock. It would not be dependent on Sprint's participation, but of course, since Sprint owns over 50% of the stock, it would have to concede. The deal would also include an agreement for Clearwire to build and operate its planned mobile network, while Dish would provide new financing. In effect, a deal would combine the TV provider's financial and business clout with Clearwire's 100MHz-plus of airwaves.
The common network would have greater scale and coverage to take on the big two, but it would also be technically complicated. Clearwire is migrating from WiMAX to TD-LTE, running some networks in parallel while it seeks sufficient funds to make the next-stage leap to LTE-Advanced. Dish has an almost unique LTE band and does not expect to be able to build out its LTE-Advanced plan on a wide scale until 2015 or later. Neither has the low frequency spectrum which is ideal for broad coverage - unlike Sprint with its refarmed 850MHz - and the unusual frequency mix will present roaming and device procurement challenges.
Clearwire said it had held talks with Dish prior to accepting the Sprint offer, and a special board committee will consider the new offer. It will keep its options open for now by holding off on taking any of the new financing promised by Sprint until the Dish offer is evaluated.
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