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Dish trumps Sprint with surprise bid for Clearwire

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Dish Network (NASDAQ: DISH) made an unsolicited offer to purchase Clearwire (NASDAQ:CLWR) for approximately $3.30 per share. The deal competes with a previous bid for the company by majority shareholder Sprint Nextel (NYSE:S), which bid $2.2 billion last month.

According to a statement from Clearwire, Dish wants to acquire Clearwire spectrum covering approximately 11.4 billion MHz-POPs, which is approximately 24 percent of Clearwire's total spectrum holdings, for $2.2 billion. As part of the deal, Clearwire could sell or lease an additional 2 MHz of its spectrum to Dish and it could also provide certain services such as network management, construction and maintenance for a network in the AWS-4 spectrum.  

Clearwire said a special committee made up of members of its board is reviewing the Dish offer but the company has not made any changes to its deal with Sprint. Sprint last month made a $2.97 per share, or approximately $2.2 billion, offer to buy 49 percent of Clearwire's shares that the company does not already own.

In a statement, Dish confirmed its Clearwire offer and said it was looking forward to working with Clearwire's special committed on the proposal.

Interestingly, Clearwire said that it received a response from Sprint in response to Dish's proposal to purchase Clearwire's spectrum. Clearwire said that Sprint "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." 

Sprint listed a number of reasons Clearwire could not enter into a transaction with Dish Network, including that Clearwire is prohibited from selling spectrum without Sprint's consent.

"Sprint has made it clear that they will not sell their 63% stake, so Dish can't take control of the asset--what is their angle?" wrote New Street Research analyst Jonathan Chaplin. "We can think of four things: 1) they are pushing for a higher bid from Sprint; 2) they are pushing for Clearwire / Sprint to sell them some spectrum and / or network assets on favorable terms; 3) they are pushing for a spectrum hosting deal with Sprint on favorable terms; 4) they are pushing for Sprint to buy DISH or their spectrum.  Whatever Dish's objective, this bid will complicate Sprint's acquisition of Clearwire, at least temporarily."

Chaplin said he believes Sprint will ultimately acquire Clearwire.

Other analysts were also puzzling through the motivations of Dish Chairman Charlie Ergen, who has said he would like to partner with a wireless carrier to help build out the company's planned LTE Advanced network using its 40 MHz of AWS-4 spectrum. "It's hard for me to imagine that what Dish wants is Clearwire," Sanford C. Bernstein analyst Craig Moffett told Bloomberg. "It could be a chess move to get a partnership with Sprint."

Some analysts think the bid could just be a way for Dish to slow down the regulatory approval and close of the Sprint/Clearwire deal. Sprint and Dish tussled extensively over the FCC's review of Dish's spectrum. Dish has also signaled it will formally oppose Japanese operator Softbank's deal to acquire 70 percent of Sprint for $20.1 billion in light of the Clearwire transaction. Dish signaled that it is concerned about a foreign company owning so much U.S. spectrum and that the deal might give Sprint too much spectrum.

Dish would get a great deal out of a partnership with Clearwire, but such a deal seems unrealistic at this point, wrote TMF Associates analyst Tim Farrar. "While Ergen's offer therefore seems like a deal that would be good for Dish, it's hard to see that Dish could realistically expect to succeed, given Sprint's majority ownership of Clearwire's equity and expressed intention to block this deal," he wrote.

For more:
- see this Dish statement
- see this Clearwire statement
- see this WSJ article (sub. req.)
- see this Bloomberg article
- see this TMF Associates blog post

Related Articles:
Clearwire investor Crest to urge FCC to block Sprint/Clearwire deal
Sprint to buy Clearwire for $2.2B
Sprint sets migration path for Clearwire network, spectrum
Analysts: Sprint may need to pay more for Clearwire, but deal is worth the pricetag
Sprint makes $2.1B offer to buy Clearwire
Clearwire and Sprint: Still the same old song and dance
Investor: Clearwire should sell excess spectrum for $9B

Updated: The original article stated that Dish bid $2.4 billion for Clearwire, however Dish's proposal, as conveyed by Clearwire in its statement is complicated and the actual amount is unclear. The satellite company first proposes to pay $2.2 billion for about a quarter of Clearwire's spectrum. It also says it will try to buy at least a quarter of the company's stock at $3.30 a share.