Sprint is likely to contest Dish’s bid on legal grounds, but the third largest U.S. wireless provider apparently is unable to raise its bid for Clearwire due to a contractual restriction imposed by Japan’s Softbank when it offered to buy 70% of Sprint for $20 billion. Clearwire’s value is virtually all tied up in the 133 MHz of wireless spectrum that the company owns, and even at $3.30 a share, there are plenty of shareholders who think that Clearwire is worth far more.
Dish’s offer is only a “preliminary indication of interest,” according to a Clearwire press release, but Sprint’s CEO has already said that 75% of shareholders would have to agree to the Dish offer in order for the deal to go through. Sprint would vote against the deal and that would be that.
So what is Dish up to? The company recently received approval from the Federal Communications Commission to use some of its satellite spectrum for terrestrial-based wireless broadband. That’s great, but building out the wireless network would cost the company billions. Far better — and cheaper — would be to acquire an existing network.
Dish could be angling for just a piece of Clearwire’s spectrum and the network equipment that goes with it. Dish tried and failed to acquire MetroPCS Communications Inc. (NYSE: PCS). It also has sought a deal with Clearwire for part of its spectrum, but Sprint slammed the door on that too. In yesterday’s offer, Dish said it would pay $2.2 billion in cash for 24% of Clearwire’s spectrum and included a commercial deal that would pay Clearwire to operate and manage Dish’s spectrum.
Dish wants to a chunk of Clearwire’s spectrum and is willing to pay essentially the full price the Sprint offered for Clearwire for 24% of that spectrum. That offer values Clearwire’s spectrum assets at around $8.8 billion, which is far more than the Sprint offer. Dish’s Ergen, a poker aficionado, has pushed a lot of chips onto the table, probably figuring that he can get some help from minority stakeholders — and perhaps even Softbank — to pressure Sprint into a deal.
Clearwire’s shares are up 7.5% today, at $3.14 in a 52-week range of $0.83 to $3.40. Sprint’s shares are down 2%, at $5.85 in a 52-week range of $2.10 to $6.04. Dish Network’s shares are up 2.8%, at $37.00 in a 52-week range of $26.12 to $37.92.