Clearwire today announced that it has received an unsolicited, non-binding proposal from DISH Network. The DISH Proposal would purchase spectrum assets from Clearwire, enter into a commercial agreement with Clearwire, and acquire up to all of Clearwire’s common stock for $3.30 per share.
Dish’s bid of $3.30 a share for outstanding stock is 11 percent higher than the Sprint offer and values Clearwire’s shares at $4.9 billion. Dish would pay $2.2 billion for a portion of Clearwire’s spectrum and forge new commercial ties with Clearwire.
Satellite analyst Tim Fararr suggests Dish wants the best slice of Clearwire’s spectrum, presumably the owned BRS spectrum, not the leased EBS spectrum, and is paying only $0.20 per MHz/POP, far below the valuation by Clearwire’s minority shareholders, and only in line with the book value of around $0.19 per MHz/POP used for owned spectrum in Clearwire’s 2011 10-K.
Sprint Nextel offered to acquire Clearwire Corp. in a $2.1 billion deal, for $2.97 per share. This values Clearwire at around US$4.2 billion and represented about a 5 percent premium on its closing stock price at the time. On December 17, 2012, Clearwire entered into a definitive agreement with Sprint Nextel for Sprint to acquire the approximately 50 percent stake in Clearwire it does not already own.
Sprint said in a statement released earlier today that it believes its offer “is superior to the highly conditional DISH proposal.” “In contrast, the DISH proposal includes a series of interdependent commercial agreements, debt and equity purchases and spectrum sales, which together with the other conditions required by DISH to complete the transaction, makes the proposal not viable. In addition, the DISH proposal would require Sprint to voluntarily waive rights that it holds as a stockholder of Clearwire and that it possesses through various vendor and customer contracts that significantly predate Sprint’s proposed acquisition of the remainder of Clearwire. Sprint does not intend to waive any of its rights and looks forward to closing the transaction with Clearwire and helping consumers across the country realize the benefits of this combination.”
“Sprint believes its agreement to acquire Clearwire, which offers Clearwire shareholders certain and attractive value, is superior to the highly conditional DISH proposal.
Dish aims to provide “wireless video, voice and data the same way that we provide video,” Dish CEO Joseph Clayton said today in a televised interview with Bloomberg.
“In contrast, the DISH proposal includes a series of interdependent commercial agreements, debt and equity purchases and spectrum sales, which together with the other conditions required by DISH to complete the transaction, makes the proposal not viable. In addition, the DISH proposal would require Sprint to voluntarily waive rights that it holds as a stockholder of Clearwire and that it possesses through various vendor and customer contracts that significantly predate Sprint’s proposed acquisition of the remainder of Clearwire. Sprint does not intend to waive any of its rights and looks forward to closing the transaction with Clearwire and helping consumers across the country realize the benefits of this combination.”
The DISH Proposal is only a preliminary indication of interest and is subject to numerous uncertainties and conditions and may not be permitted under the terms of Clearwire’s current legal and contractual obligations. It is also subject to regulatory approval.
- Spectrum Purchase. DISH would acquire from Clearwire spectrum covering approximately 11.4 billion MHz-POPs (“Spectrum Assets”), representing approximately 24% of Clearwire’s total MHz pops of spectrum, for approximately $2.2 billion (the “Spectrum Purchase Price”). At DISH’s option, Clearwire would also sell or lease up to an additional 2 MHz of Clearwire’s spectrum to DISH from a channel that is adjacent to the Spectrum Assets at a price to be calculated in the same manner as the Spectrum Assets.
- Commercial Agreement. Clearwire would, at DISH’s request, provide certain commercial services to DISH, including the construction, operation, maintenance, and management of a wireless network covering AWS-4 spectrum and new deployments of 2.5 GHz spectrum.
- Acquisition of Clearwire Shares; Governance. DISH would make an offer to Clearwire’s stockholders to purchase up to all of Clearwire’s outstanding shares at a price of $3.30 per share in cash. This tender offer would not be dependent on Sprint’s participation, but would be subject to a number of conditions, including DISH: (i) acquiring no less than 25% of the fully-diluted shares of Clearwire.
- Network Build Financing. DISH proposes to provide additional capital to fund a portion of Clearwire’s network build-out through a credit facility on substantially similar terms to those which Sprint has agreed to provide, subject to cancellation of the Sprint Financing Agreements (as described below).
- Sprint Financing. DISH has indicated that the proposal will be withdrawn if Clearwire draws on the financing under the Sprint Financing Agreements.
In response to the DISH Proposal, Clearwire has received a letter from Sprint stating, among other things, that Sprint has reviewed the DISH Proposal and believes that it is illusory, inferior to the Sprint transaction and not viable because it cannot be implemented in light of Clearwire’s current legal and contractual obligations. Sprint has stated that the Sprint Agreement would prohibit Clearwire from entering into agreements for much of the DISH Proposal.
The Special Committee of the Clearwire Board of Directors has determined that its fiduciary duties require it to engage with DISH to discuss, negotiate and/or provide information in connection with the DISH Proposal.
A calculation of outstanding shares — 1.46 billion — gets the Dish deal’s value close to $5 billion, but Dish may pursue only 25 percent of Clearwire shares, which would put that number much lower, to roughly $1.2 billion. Also, Dish is offering an additional $2.2 billion in cash for Clearwire’s wireless spectrum.
I am one of those people who think the 2.6 GHz band is undervalued because; (1) it’s internationally harmonized, and (2) there’s a lot of it (for streaming video). If Dish sold AT&T their 2.1 GHz spectrum it might be a good compliment for AT&T’s 2.3 GHz band. Dish could dispose of their complicated FD-LTE band to a needy buyer.
Dish might then have a good reason to invest in Clearwire. The infrastructure is already built and TD-LTE is better matched for video. If Dish believes tablets are the future of television, then Dish might jump on 2.6 GHz – today. eMBMS can stream 5 channels of HD 720P content in 5MHz. LTE-broadcast can also be used for multi-casting digital downloads late at night. Microcell relay stations, attached to their satellite dishes, might deliver “wireless cable” and Google phone service. Fast and Cheap.
Dish’s new Hopper has added Wi-Fi and integrated Slingbox. That allows you to transfer recorded programming to your iPad for viewing on the go without an Internet connection. Stick a bird on it. Get Apple and Amazon on board, too. China Mobile’s iPhone will likely work on Clearwire. Same deal with Samsung, HTC, LG, Hauwai and ZTE.
Sprint doesn’t want the competition. Whatever happens, it’s all highly entertaining. A variety of scenarios seem possible, even if they aren’t based in reality.
Related Dailywireless articles include; Sprint to Buy Clearwire, Dish’s Joe Clayton Talks, FCC Approves Dish Spectrum for Mobile Broadband, Sprint Buying Clearwire?, Sprint + Dish?, Sprint Gets Majority Control over Clearwire, Sprint Won’t Buy Clear – For Now, Clearwire Cuts TD-LTE Deployment, China Mobile: Go For TD-LTE Launch, Dish: On the Move , Dish and Sprint Battle over PCS band Extension, Dish CEO: T-Mobile Partnership?, Clearwire: On the Hot Zone, Dish LTE-Advanced Called “Ollo”, Clearwire Cuts TD-LTE Deployment, Dish Talks Up Terrestrial LTE, Charlie Ergen’s Spectacular Triple Play, Charlie’s Big Play,