Sprint Connection

Dish Network counters Sprint’s bid for Clearwire

Company that holds coveted wireless spectrum attracts a higher price.

Updated: 2013-01-09T05:05:35Z

By MARK DAVIS

The Kansas City Star

A rival bidder has stepped between Sprint Nextel Corp. and its wireless network partner Clearwire Corp.

Clearwire said Tuesday it received an unsolicited buyout offer from Dish Network Corp. that values Clearwire at $3.30 a share. That’s higher than the $2.97 a share deal that Clearwire’s board of directors has agreed to with Sprint.

Sprint quickly countered with a statement that its offer to buy the 49 percent of Clearwire it didn’t already own was more sound financially than the “highly conditional Dish proposal.”

Sprint also said the Dish offer would require Sprint to waive rights it had as a shareholder of and business partner with Clearwire, and Sprint wasn’t planning to waive those rights.

Clearwire, however, said it already had taken a step back from its deal with Sprint to evaluate the Dish offer.

Ownership of Clearwire is an integral part of Sprint’s plans to deliver faster wireless service using Long Term Evolution, or LTE, technology. The companies have partnered to provide wireless service in the past, and Sprint’s bid to buy Clearwire would bring its assets and operations directly under Sprint’s control.

Sprint also has made its Clearwire deal an integral part of its own merger plans with Tokyo-based SoftBank Corp., which operates the third-largest wireless network in Japan.

SoftBank funneled $3.1 billion into Overland Park-based Sprint ahead of their deal that would give SoftBank 70 percent ownership of Sprint. The funding made Sprint’s bid for Clearwire possible.

Sprint also has delayed sending shareholders documents ahead of a shareholder vote on the SoftBank deal to present the Clearwire acquisition to shareholders at the same time.

The battle for control of Clearwire reflects the industry’s scramble for wireless spectrum, the federally licensed airwaves companies need to carry customers’ cellphone and computer traffic over their wireless networks. Networks need additional spectrum because of consumers’ increasing use of mobile devices to stream videos, browse the Internet, listen to music, download apps and photos, and for other uses.

Some minority owners of Clearwire have challenged Sprint’s deal as too low because it shortchanges the value of Clearwire’s wireless spectrum.

Dish’s offer values Clearwire at $5.15 billion, which is 11 percent higher than Sprint’s offer values the company. Sprint’s deal has it offering $2.2 billion for the shares of Clearwire it doesn’t already own.

Dish Network’s chairman Charlie Ergen may be worried about the value that Sprint’s deal puts on wireless spectrum generally, said Berge Ayvazian, an industry consultant at Heavyreading.com.

Dish owns a substantial amount of wireless spectrum and has talked previously about partnering with Sprint to deploy it on a wireless network. A low-priced Clearwire sale to Sprint might hurt the value of Dish’s spectrum.

“Charlie Ergen’s a cagy fellow,” Ayvazian said. “He’s a complex guy. He does stuff for lots of reasons.”

Clearwire said a special committee of its board of directors was obligated in its duty to shareholders to discuss the offer with Dish Network and negotiate with the rival bidder.

Dish had talked to Clearwire about buying its spectrum before Sprint and Clearwire completed their deal, Clearwire said in its announcement. Clearwire said it agreed to the Sprint offer because it was “more attractive” for shareholders other than Sprint.

The Sprint deal includes badly needed financing for Clearwire that became available Jan. 2. Dish, however, told Clearwire that it would withdraw the $3.30 a share offer if Clearwire started to use Sprint’s money.

On that basis, Clearwire said it had “revoked its initial draw notice” to start using Sprint’s financing so it could evaluate the Dish offer.

Sprint, meanwhile, has told Clearwire that it doesn’t consider the draw notice to be revocable and that the companies’ agreement prohibits sale of Clearwire’s spectrum without Sprint’s consent.

Dish’s offer involves several steps. Among them: Dish would buy about a fourth of Clearwire’s spectrum for $2.2 billion, Clearwire would build a network using the spectrum Dish bought and other spectrum it already owns, and Dish would offer to buy potentially all of Clearwire’s stock for $3.30 a share but must receive at least 25 percent of the shares.

Bloomberg News contributed to this report.

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

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