Will Clearwire Wish for Dish or Stick to Sprint?

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Clearwire (NASDAQ: CLWR) is mulling over both Sprint’s (NYSE: S) takeover proposal and Dish Network’s (NASDAQ: DISH) counteroffer. However, it seems that the regional carrier has a soft spot for its Kansas partner which already holds over a 50% stake in the company. The Bellevue-based telecom provider mentioned on Friday that it is evaluating Dish’s $3.30 per share offer, though it hasn’t altered its recommendation for Sprint’s buyout offer. Other than Sprint and Dish, the spectrum-rich carrier has held talks with as many as eight companies in the past 2 years, but nothing attractive has really struck yet.

Clearwire filed a proxy statement with the Securities and Exchange Commission requesting its shareholders approve the Sprint deal and allow it to acquire the remaining 49% stake in the company. It also stated that the carrier is trying to convince both the suitors to increase their offer. Clearwire’s board member John Stanton said that the company has asked Sprint to raise its offer to $3.15 a share, but isn’t confident if Sprint would make any such consideration. Does that increase Dish’s chance to win the deal?

Is Dish hoping against hope?
A group of Clearwire investors voiced their dissatisfaction about Sprint’s $2.97 a share offer and pressed the carrier to consider Dish’s bid, hoping that this would lead Sprint to increase its offer. Sprint needs the support of these minority shareholders to make the deal happen, and these shareholders believe that a higher bid from Dish would compel Sprint to sweeten its offer. Minority shareholders, including Crest Financial and Mount Kellett, have publicly expressed their concern about the deal as it grossly undervalues the spectrum assets of Clearwire.

However, the third largest US carrier is unlikely to increase its bid, as Softbank has capped Sprint’s offer to $2.97 a share. In addition, Sprint said in December that it has received the support of Intel Corp and Comcast. But the shareholder’s concern has made Clearwire extend the deadline for Sprint’s acquisition proposal as the carrier is involved in considering Dish’s counterbid. The cut-off date for Sprint’s proposal has been pushed forward to Feb. 28. Despite the extension, Sprint is happy that Clearwire emphasized its recommendation for Sprint’s offer for the second time. The carrier boasts that it may have offered less than Dish, but there are less complications and conditions involved in its proposal.

So where is Clearwire headed? Will it seriously consider Dish’s proposal, or prefer improving its relation with its largest wholesale client?

Wish Dish or stick to Sprint?
As Clearwire is assessing the satellite television provider’s offer, it did not accept Sprint’s $80-million financing offer. Dish said that it would remove its offer if the Bellevue carrier took any such assistance from Sprint. In order to continue the negotiation with both the suitors and get a better deal, Clearwire has resisted Sprint’s $80 million financing offer both in January and February. The $80 million financing per month is part of Sprint’s $800 million of additional financing spread over 10 months as per the buyout agreement. So taking any such amount would indicate that Clearwire has accepted Sprint offer and denied Dish’s proposal.

Sprint considers that its offer is superior to Dish’s as it is simpler and has fewer conditions. Some of the conditions put forward by Dish are against Clearwire’s current commercial arrangement with Sprint. Sprint’s chance to win the takeover deal is stronger than Dish’s. However, one cannot ignore the fact that Clearwire has refused to take a total of $160 million in two months. This suggests that the regional telecom player is awaiting a better offer from Sprint and has consequently postponed its decision on the agreement.

The bottom-line
Both Sprint and Dish appear desperate to acquire Clearwire’s spectrum asset. While Sprint considers that its offer is more meaningful for the carrier, Dish boasts of a higher bid and the support of the minority shareholders. It would be interesting to watch how things move for the three players. Will Sprint win the deal by dint of its position? Or will Dish realize its dream of entering the telecom space?


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