Sprint Connection

$2.2 billion Sprint-Clearwire deal on 5-year wish list

Updated: 2012-12-18T05:14:52Z

By MARK DAVIS

The Kansas City Star

Sprint Nextel Corp. kicked in an extra 7 cents a share Monday to clinch a $2.2 billion buyout offer of its longtime wireless partner Clearwire Corp.

The agreement – equal to $2.97 a share – topped Sprint’s original offer last week and toppled Clearwire’s stock from its lofty $3.37 Friday closing price. Shares had climbed amid complaints that the original $2.90 offer was far too low and speculation that richer offers would come.

Clearwire shares ended Monday at $2.91, a decline of 46 cents or 13.6 percent. Sprint shares rose a penny to $5.56.

In a conference call Monday, Clearwire chief executive Erik Prusch emphasized that the Sprint deal beat the few other choices that Clearwire had after two years of searching for options.

Dan Hesse, chief executive of Overland Park-based Sprint, made clear just how valuable ownership of Clearwire was in Sprint’s plans to offer faster, fourth-generation wireless speeds. Sprint’s 4G service is key to its battle with larger wireless rivals Verizon and AT&T.

“This is something we wanted to do for five years, ever since we began at Sprint thinking about 4G,” Hesse said.

Sprint had thrown in then with Clearwire and a group of investors that included Intel Corp. and Google Inc. to build a 4G wireless network using WiMax technology. Sprint simply lacked the money and national footprint to do it alone, Hesse said.

That changed when Sprint agreed in October to a bid from Tokyo-based SoftBank Corp. to buy 70 percent of Sprint for $20.1 billion. Sprint, backed by $3.1 billion provided already from SoftBank, has said its bid for Clearwire is conditioned on getting the SoftBank deal done.

Both transactions are expected to be completed in mid-2013, pending successful shareholder votes and regulatory reviews. Detailed descriptions of the deals will be sent to Sprint and Clearwire shareholders in the first quarter of next year ahead of as yet unscheduled votes.

Clearwire has gotten commitments to support the deal from some of its large shareholders, Comcast Corp., Intel Corp and Bright House Networks LLC, which together own 13 percent of the shares that will vote on the sale to Sprint.

Not all owners will vote. Sprint, with about 51 percent of Clearwire’s stock, needs to buy the 49 percent owned by others and needs a majority of their votes to complete the deal.

Two groups of Clearwire owners, Mount Kellett Capital Management LP and Crest Financial Ltd., have challenged Sprint’s bid for Clearwire.

Complaints focus on the valuable wireless spectrum that Clearwire owns. Spectrum is the licensed airwaves over which wireless customers browse the Internet, download apps, watch videos and enjoy other data-intensive features of mobile phones and computers. Sprint has owned roughly half of Clearwire since 2008 because it had contributed the spectrum to the original partnership.

Mount Kellett has said that Clearwire’s unused wireless spectrum by itself would be worth $6 billion to $9 billion.

Clearwire’s Prusch said the company was unable to sell the spectrum in 2010, and the company might have to reorganize if the Sprint deal fell through.

The deal “may come down to a vote-counting exercise,” analyst Christopher King at Stifel Nicolaus & Co. Inc. said.

Gaining use of the spectrum is a key part of Sprint’s plan to provide smoother, faster and more competitive wireless service.

In the agreement, Sprint has agreed to provide Clearwire up to $800 million through monthly installments of $80 million starting in January.

Sprint said a merger would let it cut $1 billion in costs the companies otherwise would spend as separate businesses. He said much of that would come from refinancing Clearwire’s debts at lower interest rates that will be available under Sprint ownership.

Hesse said “a significant percentage” of Clearwire’s 1,000 employees would keep their jobs.

Other decisions, such as whether to continue the Clear brand of wireless services, have not been made.

Bloomberg News and the Associated Press contributed to this article.

To reach Mark Davis, call 816-234-4372 or send email to mdavis@kcstar.com.

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