Sprint sweetens offer for Clearwire, says it will negotiate with Dish Network

Sprint headquarters in Overland Park.
Sprint headquarters in Overland Park. File photo by DAVID EULITT | The Kansas City Star

Sprint Nextel Corp. on Tuesday opened its wallet a bit wider to gain full control of its longtime wireless network partner Clearwire Corp. and the valuable airwaves it owns.

The Overland Park-based wireless phone company is now offering $3.40 a share, instead of $2.97 a share, for the roughly half of Clearwire it doesn’t already own.

The move was aimed at pleasing at least some of the unhappy shareholders Sprint seeks to buy out. Clearwire was set to vote Tuesday on the lower offer but adjourned its meeting and reset the vote for May 30.

Sprint also said Tuesday it would open its financial books for Dish Network Corp. and negotiate with the company on its buyout offer. Last fall, Sprint signed a deal to be acquired by Tokyo-based SoftBank Corp.

Both events bring Sprint a little closer to settling on whom it joins forces with to take on wireless industry giants AT and Verizon as well as rival T-Mobile USA.

“Sprint is really in the catbird seat right now,” technology industry analyst Jeff Kagan said in an email. “This is a very complicated choice, but it’s Sprint’s to make.”

Bid bump

The company’s easiest decision was to raise its offer for Clearwire, whose shares have been trading on the stock market at more than $3 a share since early January.

The stock climbed again Tuesday. A 14-cent gain left shares at $3.40, equal to Sprint’s bid and raising the possibility that more must be done. Sprint called $3.40 its “best and final offer.”

Sprint shares rose 10 cents and closed at $7.39. Dish stock also climbed, gaining $1.23 to $39.93. Shares of SoftBank fell in U.S. markets, closing at $57.09, down $1.97.

Crest Financial Ltd., a Texas-based Clearwire shareholder that has campaigned against Sprint’s offer, rejected Tuesday’s higher bid. It said the new bid simply revealed “that Sprint was unable to secure a majority” of votes from other shareholders, which it needs to complete the deal.

Donna Jaegers, an analyst at D.A. Davidson Co., said Sprint probably talked with other Clearwire shareholders before settling on a price it thought would secure the needed votes.

Clearwire is critical to Sprint’s longterm plans.

It owns valuable wireless spectrum, the federally licensed airwaves that carry mobile signals that allow consumers to stream video, download apps and use other increasingly popular features of smartphones. Sprint will need the additional spectrum to meet its pledge to provide subscribers unlimited data, which runs those popular features and is a keystone in Sprint’s appeal to customers.

Sprint’s own suitors — SoftBank and Dish — both want Clearwire in the deal they ultimately hope to make with Sprint.

New directions

Dish, which operates a satellite television service, jumped into the bidding for Sprint late in the game. Its April 15 offer came after SoftBank already had invested $3.1 billion into Sprint and those companies’ began sharing ideas.

Some analysts have said Dish’s offer of $25.5 billion for all of Sprint is a better one than SoftBank’s deal to buy 70 percent for $20.1 billion.

Sprint agreed to negotiate with Dish after the Colorado company set up a $2.6 billion bond offering last week to raise added cash for its bid. Sprint said it had not made a decision whether Dish’s offer was superior to the one from SoftBank.

If it is, Jaegers said, SoftBank’s “deeper pockets” mean it’s more likely to win a bidding contest.

SoftBank said Tuesday it would sell $4.9 billion in bonds to help finance its deal, according to Bloomberg News.

In a statement, SoftBank said it granted a waiver under its deal with Sprint to allow the Dish talks and was confident its own deal would prevail.

“We continue to believe that our agreed transaction, which we plan to close in six weeks, creates substantially greater value and provides far greater certainty for Sprint shareholders,” its statement said.

SoftBank has said it expects to complete its transaction with Sprint on July 1. Sprint shareholders are set to vote on it June 12.

Comparing the price tags is only part of the decision Sprint faces. It also is weighing which partner will make it more competitive.

“Both deals have a potential upside, which is very attractive to shareholders; however, Sprint will look different depending on which they choose,” Kagan said.

SoftBank has been a successful wireless competitor in Japan, where like Sprint it is No. 3 but has gained ground on its rivals.

It also has used the same wireless technology that Clearwire is using to add faster Long Term Evolution, or LTE, wireless service. SoftBank’s experience in Japan’s dense urban centers would give Sprint help in deploying LTE in U.S. urban markets where Clearwire’s spectrum would be most useful.

Dish owns valuable wireless spectrum of its own but has said it will rely on Sprint’s expertise in the wireless business. Its sees new business for both companies by marketing to each other’s subscribers.

TV and telephones haven’t been a strong combination for Verizon and AT, which offer an alternative to traditional cable companies in some markets.

Part of Dish’s vision includes building a mobile television connection for consumers. It would tap Dish’s relationships with multiple TV channel providers and Sprint’s emerging new mobile network capable of carrying video to smartphones and tablets.

Sprint’s choice even affects when it would be able to flex its new muscles in battle with AT and Verizon.

The Federal Communications Commission is poised to approve the SoftBank transaction soon, said Jeffrey Silva, telecommunications policy analyst at Medley Global Advisors.

Sprint’s higher bid for Clearwire doesn’t change the regulatory considerations, he said, only the price tags.

Switching to Dish’s offer, however, would start the government review all over again.

“It’s a whole different deal,” Silva said.