Last week, Sprint Nextel Corporation (NYSE:S) sued both DISH Network Corp (NASDAQ:DISH) and Clearwire Corporation (NASDAQ:CLWR) after the latter’s board recommended Dish’s $4.40 per share proposal. Sprint has now raised its bid to $5 per share to top Dish’s proposal and end its war with the satellite provider. The sweetened bid has pleased the Clearwire board and also won the support of vocal critic investors who initially disapproved of the proposal, saying that it undervalued the Bellevue carrier’s spectrum asset.
Other than sweetening the bid, the Kansas carrier has also made Clearwire Corporation (NASDAQ:CLWR) agree to certain governance rules aimed to block rival bids for the regional telecom operator. The June 24 shareholders’ vote has been rescheduled for July 8. SoftBank’s investors were extremely pleased to learn that Clearwire finally seems happy with Sprint’s offer, and that the national carrier is in progress to acquire the most valued wireless airwaves.
Sprinting toward hope
Now, Sprint Nextel Corporation (NYSE:S) is confident that it would get the majority vote that it needs to complete the Clearwire Corporation (NASDAQ:CLWR) merger. The third-largest U.S. carrier said that it has the backing of 45% of Clearwire’s minority shares, which is very close to the 50% support required to purchase the whole company.
Sprint Nextel Corporation (NYSE:S) said that some activist shareholders, who possess 9% of the Clearwire Corporation (NASDAQ:CLWR)’s voting shares, support the deal and have committed to vote in favor of the deal. This group includes Glenview Capital Management, Mount Kellett Capital Management, Chesapeake Partners Management, and Highside Capital Management (who had once teamed to block the consolidation proposal). Additionally, these hedge funds have promised to sell their stake to Sprint, even if the deal falls through. Also, if the deal fails, Clearwire will have to pay Sprint compensation of $115 million.
The improved offer brings Clearwire Corporation (NASDAQ:CLWR)’s enterprise value to $14 billion, which is 47% up from Sprint Nextel Corporation (NYSE:S)’s last proposal and 14% higher than Dish’s offer. Both DISH Network Corp (NASDAQ:DISH) and Sprint have been involved in a bidding war since January in an effort to get the ownership of Clearwire’s vast store of valuable 2.5 GHz spectrum, which is the primary base on which a wireless network is built.
Sprint knew that ownership of Clearwire Corporation (NASDAQ:CLWR) was crucial to SoftBank’s and Sprint Nextel Corporation (NYSE:S)’s future plan to build a tougher and stronger contender in a wireless market led by two prominent players, Verizon Communications Inc. (NYSE:VZ) and AT&T Inc. (NYSE:T). Sprint is the third-largest wireless national carrier, but is way behind the big two. Similarly, Clearwire’s support is crucial for DISH Network Corp (NASDAQ:DISH), which has been struggling to make a name in the telecom space. The satellite TV operator’s core-pay television business isn’t reaping enough profits, and its customer base is shrinking as well.
Now that both Sprint and Clearwire Corporation (NASDAQ:CLWR) are off the table, it is unclear what alternatives Dish will explore.
Dish’s next move
Sprint Nextel Corporation (NYSE:S) outpaced DISH Network Corp (NASDAQ:DISH)’s $4.40 per share bid just a couple of days after the latter decided to give up its hunt for the Kansas carrier. Dish’s Chairman, Charlie Ergen, is known for making some of the most unexpected negotiations in business. Ergen’s next step remains a mystery. The company amassed wireless spectrum, with the vision of diversifying into the wireless arena, as its satellite television business has slowed down. A combination with an existing national level player, such as Sprint, would help the company enter the telecom industry and effectively compete with industry leaders, Verizon Communications Inc. (NYSE:VZ) and AT&T Inc. (NYSE:T).
After giving up on its chase for Sprint, the company said that it would focus on the Clearwire deal, but that, too, has failed. By acquiring Clearwire’s 2.5GHz spectrum, the satellite TV provider proposed to offer HD movie content and bundled mobile services similar to what AT&T and Verizon already offer. The company plans to offer media content in addition to phone services, in collaboration with an existing telecom partner. So, finding a wireless partner is essential, as Dish doesn’t possess the required technical know-how to build a telecom wireless network.