Sprint's Revised Bid for Clearwire

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After being sued by Sprint Nextel Corp. (S), DISH Network Corp. (DISH) seems to have completely lost its chances of acquiring Clearwire Corporation (CLWR) as the former has raised its bid for Clearwire’s shares by nearly 47% to $5 per share, thereby outpacing DISH Network’s $4.40 per share offer.

The revised bid has also earned strong support from the special committee and the board of directors of Clearwire. In order to consider the potential of the new offer, they the board decided to hold a Special Meeting of Stockholders on Jul 8 after canceling the same on Jun 24.

At present, Sprint holds 50.8% of Clearwire stakes, so by acquiring the remaining shares for nearly $14 billion (inclusive of enterprise value) the company will not only achieve full complete control over Clearwire but will also gain access to its 2.5 GHz spectrum portfolio, hence allowing Sprint to solve its spectrum crisis.

Likewise, Clearwire requires huge cash to rollout 4GLTE services across its footprint. Thus, selling out its entire stake to its parent firm will address both the issues (shortage of cash and better marketing support from Sprint).

On the other hand, DISH Network will be the ultimate loser if it fails to win the deal, as the company is trying to utilize its Clearwire’s huge spectrum portfolio in order to set up wireless network across the U.S. So, by acquiring the 2.5 GHz Clearwire airwaves, DISH Network can easily deliver huge HD movie content to its subscribers as the 2.5 GHz band of spectrum is generally suitable for transferring huge data in densely populated areas. Moreover, it can also offer triple-play services to its subscribers just like the other carriers like AT&T, Inc. (T) and Verizon Wireless, thereby reducing competition.

On the flipside, we remain concerned about Sprint’s debt position as the company exited the first quarter of 2013 with $16.7 billion of debt. So, the acquisition of Clearwire will further raise the company’s debt position.

Currently, Sprint has a Zacks Rank #3 (Hold).

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