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Endless Hurdles May Threaten This Telecom Deal: Clearwire Corporation (CLWR), DISH Network Corp. (DISH), Sprint Nextel Corporation (S)

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Clearwire Corporation (NASDAQ:CLWR) has twice resisted Sprint Nextel Corporation (NYSE:S)’s financing and did not withdraw funds in January and February despite its cash-tight position. The money losing company is in severe need of capital infusion and is struggling to strike a better deal to maximize returns to its shareholders. But now, according to individuals familiar with the matter, the company is planning to accept the additional finance offer made by Sprint. DISH Network Corp. (NASDAQ:DISH) had clearly said that if Clearwire Corporation (NASDAQ:CLWR) accepted funds from Sprint, the satellite provider would take back its proposal. The company claims its $3.30 a share deal to be superior to Sprint’s $2.97 a share offer. However, Clearwire Corporation (NASDAQ:CLWR) continues to recommend Sprint’s deal over Dish’s proposal to its shareholders, although the Bellevue carrier says that it is evaluating both offers. This again reaffirms Clearwire’s soft corner for its largest stakeholder. So what’s there for Dish?

Has Clearwire Disqualified Dish?
The second largest US satellite TV provider told Clearwire Corporation (NASDAQ:CLWR) it would withdraw its proposal if the carrier accepts Sprint’s financing option as that would increase the Kansas carrier’s stake in Clearwire Corporation (NASDAQ:CLWR). If the regional carrier is taking financial assistance from Sprint, it indicates that the company has dismissed Dish’s offer since the additional finance is part of Sprint acquisition proposal. However, an individual close to the matter said that accepting Sprint’s financial aid does not disqualify Dish’s deal.

Though the spectrum-rich company has an inclination to accept its largest wholesale partner’s offer, it is witnessing tough opposition from both investors as well as Dish, which further complicated the process by making a higher counterbid.

Hurdles on the way
Clearwire investors including Crest Financial and Mount Kellett Capital Management have been opposing the deal for a long time. Both consider that Sprint is grossly undervaluing the spectrum asset of Clearwire and this does not serve the best interest of shareholders. Their argument got stronger after Dish made an 11% higher offer.

On Feb. 25 Crest Financial, which has an 8% stake in the company, presented an independent study conducted by Information Age Economics (IAE). The research suggested that Clearwire’s spectrum is being unfairly underrated by Sprint’s $2.97 per share proposal. The study indicates that the carrier’s spectrum is about two to three times the price that Sprint has offered in the takeover bid. As per the latest filing that Crest made with the Federal Communications Commission (FCC), Clearwire’s spectrum is worth $0.21 per MHz-POP according to Sprint’s valuation. However, the IAE study calculates the worth of Clearwire’s spectrum to be in the range of $0.40 to $0.70 per MHz-POP based on the latest comparable spectrum deals. The Houston-based investment firm has filed a suit against both Clearwire’s board and Sprint for intentionally undermining the spectrum value to get the deal done at an extremely depressed rate.

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