Yet another twist in the Sprint/Softbank/Dish saga ‘ Dish has topped Sprint’s bid for full control of the Clearwire venture, days before the initial offer is due to be put to a shareholder vote. The news came a day after US foreign investment regulators approved Softbank’s separate bid for a 70% stake in Sprint, which Dish is also seeking to derail with its own 100% acquisition proposal.
A week ago, Sprint raised its offer for the shares in Clearwire it does not already own (it holds just over 50%), apparently in order to seal the deal and fend off Dish. It upped its offer from $2.97 per share to $3.40 to reassure some shareholders which had argued that Clearwire’s huge spectrum assets were being undervalued. However, shareholder Crest Financial and a group of investors led by Mount Kellett Capital Management rejected the new terms, still saying the spectrum should attract a higher valuation.
Dish has now gazumped the new price again with a $4.40 offer. The satellite-TV operator wants a mobile broadband network in order to launch a full quad play against the big telcos and cablecos. It has said it needs additional frequencies, or preferably a major network partner, to create a viable business around its existing spectrum holdings in the former mobile satellite band.
Its offers for Clearwire have always appeared to be a ploy to get close to its real prey, Sprint, whose Network Vision platform could host Dish’s network, greatly reducing roll-out costs. Both of Sprint’s suitors are keen to include full control of Clearwire, with its 2.5GHz spectrum, in the outcome, and Softbank has put pressure on the US cellco to ensure it fights off Dish for the WiMAX-turned-LTE provider.
But by upping the offer for Clearwire now, Dish risks an increase in its total costs if it succeeds in buying Sprint ‘ its ability to finance that $25.5bn deal has already been questioned, among others by some Sprint directors. However, it could create further complications that could help its primary battle, to see Softbank out of Sprint.
And Clearwire has its own financing challenges, and needs to complete a deal urgently. It said recently that it needed at least $1.7bn to keep operating, and has already drawn down several instalments in a financing deal with Sprint. Dish has sweetened its offer by promising to provide financing of $80m a month from completion, matching the program already in place with Sprint.
‘The special committee of Clearwire’s board of directors has received Dish network’s offer and will review it to determine the best course of action for the company and its stockholders,’ said Clearwire in a statement. ‘The special committee has not made any determination to change its recommendation of the current Sprint transaction.’
The day before Dish’s action, Sprint and Softbank said they had reached a deal with CIFUS, the US foreign investment agency which examines security implications of foreign takeovers. Although Dish has made capital out of arguing there are national security risks in foreign ownership of a key operator, CIFUS said there were no unresolved issues to address. If Softbank succeeds, a special security director, approved by the US government, will be nominated to Sprint’s board. It has been reported that Softbank has promised to invest billions of dollars in removing Huawei kit from Clearwire’s networks, should it end up the main owner of both Sprint and the smaller carrier.