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Sprint Corporation Message Board

  • cohsgrad cohsgrad Oct 8, 2011 11:02 PM Flag

    Conference Call Question

    Sprint is carrying Clearwire at $3.92 a share ($2.1 billion) and indicate that they believe that this is what the true fair value of the shares is. In the conference call they indicated that they basically didn't know anything about CLWR's finances.

    Can someone explain the divergence to me??? One statement appears to be false and I'm not sure which it is.


    From page 6:

    Sprint's Recoverability
    Sprint's ability to recover the carrying value of $2.1 billion as of June 30, 2011 depends, in part, upon Clearwire's ability to obtain sufficient additional funding to support its operations and its ability to successfully develop, deploy and maintain its 4G network. Uncertainty regarding Clearwire's timing and ability to obtain sufficient additional funding could result in significant changes to Clearwire's stock price and value. A sustained decline in the estimated fair value of Clearwire that would be deemed to be other-than-temporary could result in a material impairment to the carrying value of our investment. We do not intend to sell our 54% economic interest in the foreseeable future, and recoverability of our equity investment is not affected by short-term fluctuations in Clearwire's stock price.
    Clearwire has reported significant net losses since its formation and we expect Clearwire to continue to generate net losses in the near term. The carrying value of Sprint's investment in Clearwire has declined approximately $1.8 billion since Clearwire's formation in November 2008, primarily resulting from Sprint's share in equity of net losses of Clearwire, resulting in a decline in Sprint's per share carrying value of Clearwire from $10.65 as of December 31, 2008 to $3.92 as of June 30, 2011. As of June 30, 2011, based on the assumed exchange of our Class B Common Interests for Class A Common Stock, the carrying value of Sprint's investment in Clearwire of $3.92 per share over Clearwire's closing stock price of $3.78 per share was equivalent to an excess of $75 million.
    At each financial reporting measurement date, we evaluate the excess, if any, of Sprint's carrying value over the estimated fair value of our investment in Clearwire to determine if such excess, an implied unrealized loss, is other-than-temporary. Our evaluations consider, among other things, Clearwire's market capitalization, which assumes expectations of future performance, as well as Clearwire's historical stock price, including historical and implied volatility associated with Clearwire's common stock. Based on our evaluations, we believe that as of June 30, 2011 the implied unrealized loss in value is the result of a temporary decline (See Note 15).

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