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What the Major Opponent of the Sprint Nextel Corporation (S)-Clearwire Corporation (CLWR) Merger May Really Be Up To

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To the surprise of many, including me, Sprint Nextel Corporation (NYSE:S) significantly upped its bid to buy the remaining stake it does not own in Clearwire Corporation (NASDAQ:CLWR). Still, this was not enough for some Clearwire shareholders, which left me scratching my head.

“What do these shareholders in the nearly bankrupt wireless carrier want? Better yet, why are they so determined to scuttle Sprint’s attempts to outright own all of Clearwire?”

Look no further than letters written on behalf of a major opponent of the Sprint Nextel Corporation (NYSE:S)-Clearwire Corporation (NASDAQ:CLWR) deal to get some answers. That opponent is Crest Financial, which owns about 8% of Class A shares in Clearwire.

Fluid situation

Before getting into what I found in these letters, let’s look at what’s happened since I last posted that Clearwire should turn down Sprint’s original offer.

Sprint Nextel Corporation (NYSE:S) is now offering $3.40 a share for the nearly 50% stake in Clearwire Corporation (NASDAQ:CLWR) that it does not already own. That is 14% higher than Sprint’s offer in December of $2.97 a share. That was valued at $2.2 billion. This new offer is valued at roughly $2.5 billion. On Wednesday, Clearwire’s board of directors signed off on Sprint’s latest offer. Shareholders will vote on May 31.

Sprint Nextel CorporationRemember, Sprint Nextel Corporation (NYSE:S) is trying to buy the remaining stake in Clearwire Corporation (NASDAQ:CLWR) so that it can move forward with a deal with Japan-based SoftBank. That telecom company is trying to buy 70% of Sprint for about $20.1 billion. Sprint’s shareholders are set to vote on that on June 12. Also, remember that DISH Network Corp. (NASDAQ:DISH) has thrown its hat in the ring of potential buyers for Sprint. It offered to buy Sprint, which is the country’s third largest wireless carrier, for roughly $25.5 billion.

On Wednesday, DISH Network Corp. (NASDAQ:DISH) threw a monkey wrench in to Sprint Nextel Corporation (NYSE:S)’s shareholders getting to vote on SoftBank’s offer. The satellite provider has rolled out an advertising campaign suggesting the Spring-SoftBank deal could threaten U.S. national security, according to Reuters, which summed up the campaign as a way to “sway lawmakers and win support for its rival offer.”

Revelation of this stunt by DISH Network Corp. (NASDAQ:DISH) came just one day after its chief executive, Charlie Ergen, said in statement, “We look forward to engaging in full due diligence and continued discussions with Sprint…” This was in response to SoftBank granting Sprint a waiver to talk to DISH.

What’s at stake

As the parties bicker over Clearwire Corporation (NASDAQ:CLWR)’s value, and who should buy Sprint Nextel Corporation (NYSE:S), the main goal of all of this is Clearwire’s spectrum. In a recent post, I pointed out how valuable spectrum is to players in the wireless space. For Sprint, SoftBank’s offer hinges on it locking up the remaining stake in Clearwire, and therefore its spectrum. It’s an entirely different issue for DISH Network Corp. (NASDAQ:DISH), which already has a considerable amount of spectrum. However, it has no network to use it on, rendering the valuable source nearly useless.

Shareholders beware…of both sides

The noisiest dissident is by far Crest Financial. When it first started to complain about Sprint Nextel Corporation (NYSE:S)’s offer, it was understandable considering Sprint’s offer was lower than DISH Network Corp. (NASDAQ:DISH)’s. The letter I mentioned earlier that was sent to shareholders by Crest talks of $240 million in convertible debt that Crest has offered to provide Clearwire Corporation (NASDAQ:CLWR). While it says its terms for Clearwire are better than Sprint’s financing of $80 million a month, it behooves shareholders to carefully consider the financial gain Crest will enjoy if Sprint’s offer is shot down.

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