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Clearwire gets closer to accepting Sprint deal

Says it will take a month's worth of financing in March, which could lead to Sprint takeover, and a blow to rival Dish


Published: 28 February, 2013

READ MORE: M&A | Clearwire | Sprint Nextel Corporation

Clearwire has kept its warring suitors waiting for some weeks but may finally have made its choice. It says it will take $80m in financing from Sprint next month, which does not finally mean it has accepted the cellco's offer for full control, but makes this more likely. Pay-TV provider Dish Network mounted a counterbid and failure would be another blow to its ambitions to be an LTE operator.

Dish had made a rival bid for Clearwire, although given that Sprint owns just over 50% of the broadband wireless carrier's shares, it was always disadvantaged in the contest, and many saw the offer as a gambit to get closer to Sprint, which itself is due to sell a 70% holding to Japan's Softbank. Dish wants to build a national LTE-Advanced network in its mobile satellite spectrum, but has admitted it needs a partner to do so, both to add to its capacity and bring mobile knowhow.

In the latest twist, Clearwire says it will take Sprint's cash in March as part of a 10-month financing agreement, worth $800m in total, which Sprint extended to its joint venture when it agreed to buy out the smaller firm's shares in December for $2.97 each.

Clearwire has not decided if it will take more than one month of payments, though it has already lost the right to draw on the January and February installments, according to a statement. It added that it was still in talks with Dish over its $3.30 counterbid. However, the acceptance of the March funding, in the form of exchangeable notes (which Sprint can convert into Clearwire stock at $1.50 each under certain conditions) seems a clear signal, and also increases the carrier's shareholding.

Walt Piecyk, an analyst with BTIG, told Bloomberg that the latest move may provoke a response from Dish chairman Charlie Ergen. "The ball now moves into Charlie's court," he said. "Either he modifies his offer or backs off to see how the minority shareholder vote goes." Several shareholders have mounted legal action claiming Sprint's offer undervalued Clearwire, particularly its spectrum assets.

Dish has said that its proposal would require Clearwire to terminate its financing agreement with Sprint. The terms could be modified, and the satellite TV provider could even take the fight to court, said analysts.

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