Clearwire Sells to Sprint
December 17, 2012

Sprint Completes Buyout Of Clearwire

Peter Suciu for — Your Universe Online

While Sprint Nextel continues to trail Verizon and AT&T, the nation´s third largest mobile carrier made a major power play on Monday. Clearwire Corp. agreed to sell roughly half of the company for $2.2 billion to mobile phone carrier Sprint Nextel Corp.

This move gives Sprint full ownership of spectrum and allows it to offer high-speed wireless services known as the Long-Term Evolution (LTE) network. This technology is based upon the same data standard as the newest generation of smartphones.

“Today´s transaction marks yet another significant step in Sprint´s improved competitive position and ability to offer customers better products, more choices and better services,” said Sprint CEO Dan Hesse. “Sprint is uniquely positioned to maximize the value of Clearwire´s spectrum and efficiently deploy it to increase Sprint´s network capacity. We believe this transaction, particularly when leveraged with our SoftBank relationship, is further validation of our strategy and allows Sprint to control its network destiny.”

The art of the deal involved many moving pieces, and included a last minute bump to $2.97 a share and was up from the $2.90 that was offered on Thursday. As noted by The New York Times on Monday, Sprint was able to complete this deal thanks to the cash it had received from SoftBank of Japan. In October, the Japanese carrier agreed to pay $20.1 billion to gain majority of Sprint Nextel.

Clearwire owns spectrum for its WiMAX network that is similar to what SoftBank utilizes in Japan and this deal now gives Sprint renewed clout in obtaining the latest handsets, something that has caused the company to linger behind its rivals.

SoftBank has to provide its consent to the transaction. It is believed Japan´s SoftBank, which is also in third place in the Japanese mobile market, is looking to shake up the U.S. wireless market.

Sprint was not the only company to be seen as a potential suitor for Clearwire. The Wall Street Journal noted Clearwire had also received commitments from Comcast Corp., Intel Corp. and Bright House Networks LLC. Collectively, those companies own about 13 percent of Clearwire´s voting shares.

This isn´t exactly a holiday miracle for Clearwire, but the company has struggled financially as it attempted to play catch-up with major U.S. carriers in rolling out fourth-generation LTC wireless standard, as this required a transition from the original WiMAX 4G service it has been offering.

And not everyone is seeing this move as a good one, as some shareholders are not pleased with the terms of this sale. Reuters reported shareholder Mount Kellet said last week the $2.90-a-share deal was “grossly” undervalued. Another shareholder, Crest Financial — which owns more than three percent of Clearwire — had also filed a lawsuit to stop the company from selling itself to Sprint.

These investors suggested Sprint should have offered as much as $5 per share. However, Clearwire´s executives have been very much on board.

“Our board of directors has been reviewing available strategic alternatives over the course of the last two years,” said Clearwire CEO and President Erik Prusch. “In evaluating available alternatives, a special committee conducted a careful and rigorous process, and based on the committee´s recommendation, our board unanimously determined that this transaction, which delivers certain and attractive value for our shareholders, is the best path forward.”

It seems Prusch and the board may have 2.2 billion reasons to be happy about their sprint down that path.