Roadblocks In The Way Of This Telecom Deal

Rajesh is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.

The recent counterbid made by Dish Network (NASDAQ: DISH) has made Clearwire (NASDAQ: CLWR) investors more determined to push Sprint (NYSE: S) to increase its $2.97 per share offer. The $3.30 a share offer made by Dish justifies the investor's argument that Sprint is grossly underrating the Bellevue, Washington-based carrier’s true value. Now, more of Clearwire investors have voiced their opinion and dissatisfaction about Sprint’s acquisition talks with the regional player.

Investors voicing their concerns regarding Sprint’s proposal
According to CNET, several Clearwire investors have made it crystal clear that they would vote against the Sprint proposal. Glenview Capital Management, which holds 28 million Class A shares of Clearwire, is against the $2.97 a share offer and would subsequently reject it. Another shareholder, Taran Asset Management, plans to file a complaint with the Federal Communications Commission (FCC) as a protest against the offer, stating that the spectrum-rich company is worth more than Sprint’s petty consideration. Chris Gleason, a spokesperson of this New York-based firm, said that a deal would be struck only if the Kansas carrier bids higher. He said that "to pretend they don’t have to raise their bid is silly."

Houston-based Crest Financial has already requested that the telecom regulator restrict the deal from happening as Sprint isn’t giving Clearwire the right price for its most valued possession spectrum. Another investment firm, Mount Kellett Capital Management, has asked the Clearwire board and committee to reflect on Dish’s proposal rather than considering Sprint’s takeover bid, which fails to appreciate the company’s true worth. Jonathan Fiorello, COO of Mount Kellett, which owns 7% of Clearwire’s shares, said "it is incumbent on the Special Committee to take its time to thoroughly and thoughtfully evaluate the Dish proposal."

Sprint’s confidence is irrational
Though Clearwire investors object the deal and consider it an unfit proposal, Sprint argues that its $2.97 per share bid is ‘superior’ to Dish’s $3.30 per share counteroffer. The telecom giant is pretty confident that this deal is secured given its current majority stake and dominant position in the company.

However, Dish boasts that its offer is better and isn’t conditioned or dependent on the happening of another deal. Not only did it make a higher bid, but it also isn’t relying on other deals to pump in cash and fund the Clearwire deal. Sprint's acquisition proposal is reliant on the cash infusion from Softbank, which plans to acquire a 70% stake in the third largest US telecom player.

The second largest US satellite TV provider’s strategy is to enter the wireless world and offer mobile phone services. Some analysts think that Dish’s main purpose is to prevent Sprint from acquiring Clearwire so that it can strike a partnership deal with the telecom carrier to make an entry in the wireless broadband space.

My takeaway
Sprint’s struggle seems never-ending. A deal with Softbank would give it the required strength to fight the growing duopoly of Verizon and AT&T. The Clearwire acquisition would augment its spectrum position vastly. However, both the deals are facing opposition. It seems that Sprint will have to make some amendments to appease Clearwire shareholders, even though its $2.97 offer has been capped by Softbank.


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