The ongoing fluctuations in the mobile market took yet another turn today as Sprint Nextel announced its intentions to buy out its longtime partner, Clearwire, for $2.1 billion. The acquisition talks were disclosed in SEC filings Thursday morning, and Bellevue-based Clearwire said it would not be commenting further on the possibilities of a deal.
“Clearwire does not comment on ongoing negotiations with counterparties and, under the direction of the Special Committee, continues to be in discussions with Sprint to explore a transaction,” the company wrote in a SEC filing. “There can be no assurance as to the terms of any potential transaction or that any transaction will result.”
As we noted earlier this week when word of the deal first leaked out, the relationship between Clearwire and Sprint has been rocky over the years. However, following on the heels of Sprint’s own deal with Japan’s Softbank — not to mention external pressures from T-Mobile agreeing to buy Metro PCS — the mobile carrier landscape has quickly changed.
Sprint already owns 51.7 percent of Clearwire, but it wants the remaining stake of the mobile broadband company, largely due to its strong spectrum position. The deal would value Clearwire at roughly $4 billion. It also brings Sprint CEO Dan Hesse back into the limelight with a Seattle area company. Prior to joining Sprint, he led Redmond startup Terabeam Networks and served as CEO of AT&T Wireless.
Despite those connections, it will be interesting to see how the $2.1 billion offer sits with some Clearwire investors.
Last month, Mount Kellet Capital Management’s Jonathan Fiorello suggested that Clearwire’s unused spectrum assets could be worth anywhere from $6 billion to $9 billion — with just that portion of the business valued about double Clearwire’s current market capitalization of $4.5 billion
Fiorello, whose company owns about seven percent of Clearwire, suggested that Sprint may try to buy Clearwire for a steal, offering this warning to the Clearwire board:
Moreover, given Sprint’s newly solidified position as the controlling party of Clearwire, the intertwined business arrangements between the two companies and the potential conflict between the interests of Sprint and those of the public stockholders of Clearwire, we believe that any transaction between Clearwire and Sprint should be subject to a very high standard. As evidence of Sprint’s desire to exploit Clearwire as a subsidiary, Dan Hesse stated on the October 15, 2012 call regarding Softbank’s investment in Sprint “the two companies will utilize both FD-LTE and TD-LTE.”
It is our understanding that as currently configured, Sprint does not have the spectrum depth or capacity to offer both a FD and TD network without Clearwire. We urge the Board to commit to submit any material transaction to a vote of the stockholders unaffiliated with Sprint so that the stockholders can determine for themselves if the transaction is at arm’s length, on reasonable terms and in the best interest of Clearwire. If the Board refuses to do so, be aware that the public stockholders of the Company, including Mount Kellett, will be carefully scrutinizing any and all such transactions to make those determinations and avail themselves of all appropriate actions to prevent or redress any wrongdoing.
In other words, the deal proposed today by Sprint does not appear to be a slam dunk just yet.