Masayoshi Son's "Acceptance of Defeat" Speech... what it means:
Late the week before last, Masayoshi Son made a statement that he was fine with 67% ownership if (when) the vote on Sprint's ridiculous, $2.97 offer goes down in defeat. He essentially said he would acquire the shares of sprint lap-dogs, Intel, Comcast and Brighthouse and sit back while the remaining minority shareholders went along for the sprint/softbank/clearwire ride.
They usually say such things before they raise their bid, but Son is a skinflint shopping the U.S. bargain basement shelves... he'll probably go down in flames at $2.97 and focus on Charlie Ergan's superior bid for sprint.
What it means is that owning 67% instead of 48% puts 2/3 of everything that Clearwire is squarely on sprint's balance sheet and income statement. Whatever hurts clearwire takes a chunk out of the hide of Sprint from the perspective of Fitch, Moodys and S&P. 67% of the cash burn, 67% of the losses, and co-responsibility for the debt.
For the past 3 years, Sprint (Hesse) has been demolishing Clearwire... to get sprint a good buyout price (which it did) in return for helping the buyer buy clearwire for the price it demolished it DOWN to. 67% aint bad... mission "mostly" accomplished.
So now, sprint/softbank/clearwire... or sprint/dish/clearwire, must do battle as a healthy, progressive entity, with AT&T, Verizon and T-Mobile/MetroLTE... er... PCS. In light of that... I ask you this: at 67% interest, and fully absorbed by dish or softbank, it it in sprint's best interest to continue flogging it's red-headed step-subsidiary... or is it time to begin "empoweing" it, and enjoying the results on it's consolidated financial statement?
Would the likes of Masayoshi Son choose to intimidate would-be wholesale customers of clearwire's excess spectrum... or would he choose to lease it out and flow the cash-flow to sprint's income statement?
After consolidation, I think the incentives re: sprint's red-headed, step-subsidiary change. What do you think?
That’s exactly right. Now, there is nothing stopping Sprint from withholding fund to starve Clearwire and forces creditors to go after Sprint. Sprint will then purchase Clearwire’s collateralized debt from creditors and the spectrum belongs to Sprint after a planned bankruptcy. This is called plan B and everything is legal.
Debt holder's do not own spectrum. The spectrum secures the debt, which means the spectrum can be sold to pay the debt. So if Sprint forces Clearwire into BK liquidation the spectrum will be sold to the highest bidder(s). Hesse already learned the hard way this is a really bad plan, which is why Clearwire has successfully threatened to default in the past.
Clearwire says in the event of BK liquidation shareholders are likely to receive less than $2.97 per share. But based on most estimates of the spectrum value, they would receive $4 to $8 per share.