A lot of headlines are going to be thrown around on this topic.
If you're going to put money behind the sizzle, you should read the document carefully.
To summarize - the document does not indicate that (a) Sprint needs to acquire Clearwire, nor (b) Softbank intends to acquire 100% of Sprint.
Along with the acquisition of Sprint Corp, Son/Softbank is asking for "consent to transfer Sprint's prospective de jure controlling interest in Clearwire's licenses, spectrum leases, and authorizations".
"prospective de jure" does not indicate that Sprint is required to purchase Clearwire. The issue is explained on a footnote (#12 on pg 9), where it is stated:
"Sprint is acquiring additional shares in Clearwire as part of a separate transaction with Eagle River Investments LLC, which will give Sprint a de jure controlling interest in Clearwire"
This implies that (a) the Eagle transaction has not closed yet, and (b) after it does close, Sprint will be seen as having control of Clearwire, in the eyes of the law.
Another headline indicates that they're seeking FCC approval of ownership of 100% of Sprint. This is untrue --- they're seeking FCC approval of foreign ownership of 100% of Sprint, which is 70% Son/Softbank owned, and 30% publicly owned. They want to make sure that foreign entities purchasing the remaining 30% (e.g. Ontario Teachers) will not trigger any issues at the FCC.
Amusing that the rumors abounding today are exactly the issues I raised in this post.
Day traders are slowly coming to the realization that this filing means nothing, other than further confirmation that Clearwire is under Sprint/Softbank control.
r.piggot, Thank you for the factual and informative post. Perhaps you can answer a few more questions:
1) Where can I find a copy of the actual FCC filing? I tried going to the FCC site without success the first try.
2) Is "New Sprint" (70% owned by Softbank) or Softbank requesting the transfer of controlling interests in Clearwire's licenses, spectrum leases, and authorizations?
3) Since after the McCaw deal closes, Sprint will be seen as having control of Clearwire, in the eyes of the law, doesn't this constitute a change of control?
More on CoC issues:
Sprint offers bondholders a dollar to let SoftBank deal go through
The payment would be made on each $1,000 of Sprint debt the bondholder owns. It covers various bonds due in 2017 through 2020.
Without the changes in the bond agreement, Sprint would be required to buy back the bonds if there was a change in control of the company. Sprint also would have to pay 101 percent of the bonds’ face value plus any unpaid interest that had accrued.
The new agreement, if enough bondholders accept, would count SoftBank and its affiliates as an exception to the change-of-control rule.
SoftBank has agreed to buy 70 percent of Sprint for $20.1 billion.
1. Do a Google search for "sprint, fcc, clearwire". Go to the bizjournals link (Kansas City article). The filing is embedded at the bottom.
2. New Sprint will be controlled by Softbank, which is controlled by Son. Therefore, they need to seek consent from the FCC for the effective change in control. New Sprint is the corporation which will own the 50.45% interest in Clearwire.
3. "Change of control" will mean different things to different parties, depending on how their contracts are defined. I believe the indentures and the CEO parachutes don't label a change of control of Sprint as a change of control of Clearwire. However, from the FCC's point of view, this is an effective change of control of the licenses.
Sprint has, as soon as the transaction is legitimately completed, have ownership of Clearwire even thought Hesse and S BOD will likely continue to play hanky-panky malarky until after the deal closes.. and maybe longer.
We've discussed this before: Sprint does not want the junk bond debt on their books until they are in full position to have the weight of Softbank's financial strength. That will allow them to assume the debt with less strain and also be in position to get it refinanced/rolled over to lower interest rates... its at a gutter-dweller level around 10-12%+.
Why doesn't someone challenge Sprint on this?.. ie claim that they should now admit they own Clearwire? Because who would? Stock investors? No, not directly. Competitors hoping to derail the Softbank deal? Maybe but that would not be taken as being in good faith competition... and how would they challenge it anyway? They have no standing in court/legal damages terms that I can see. Their complaints would likely be limited to the protests AT&T might mount with the FCC hearings.. so far it looks like Verizon has remained silent, probably owing to the fact that they are the king of the hill having been given the go ahead to purchase the AWS spectrum and do deals with the cable companies for content and co-marketing arrangements.. it would be a bit absurd for them to now object to the distant third player doing some subterfuge while their deal with SB is being considered.
Clearwire has been saying for 2-3 years that they have big deals in the works. All that is hogwash when it comes to control over the business: Clearwire has majority interest in the company. Unless Clearwire comes through with a major partner ponying up a few billions for equity stake in the company, it is going to be locked into being in control of Sprint-SB. Crest and Kellett entered their protests to the BOD because of this situation... they stated the reasoning... which was that shareholders could be squeezed out even while the long term prospects improve.
IMHO i think evrrybdy. tryn to deraill clwr to get cheepest buyout price presurin clwr to sell clwr. ain't budgin dey hav license asgmnt of valuable spectrum wrth. at least10 x mre den
There is no assignment of CLWR Licenses, Spectrum Leasing or Authorizations, meaning no transfer of ownership of the valuable CLWR spectrum to S or Sb. The filing is only for the consent to transfer Sprint's prospective de jure controlling interest in Clearwire's licenses, spectrum leases, and authorizations to Sb. Those are two entirely different things. I think the filing finally reveals for the first time by the acquring party, that Sb wants that CLWR spectrum, and not for just de jure controlling interest. Controlling interest doesn't tell you what parts are owned by Sb/S and which parts are owned by the rest of the shareholders. Once Sb obtains de jure controlling interest, maybe they could block a sale of excess spectrum. Until then, anything goes. CLWR sees the intention, so they may want to get with an investment bank immediately. Sb wants to ultimately own it. That is really clear to me now. That's my take on it and I think the filing is really a whole lot about nothing for now. Still waiting on INTC for tomorrow with that right of first refusal. That would be a big one to rock the whole boat.
Sentiment: Strong Buy