Sprint Nextel (NYSE:S) is in talks with Clearwire (NASDAQ:CLWR) investors to try to gain control of the company's board without having to acquire it. According to the Wall Street Journal, Sprint is talking to Clearwire investors, including Comcast, to try to find a way to control Clearwire without buying it.
According to a separate Bloomberg report, Sprint acquired Eagle River Holdings' 4.5 percent stake in Clearwire, which would give Sprint control of Clearwire's board. The report, which like the Journal report cited unnamed sources, said the Eagle River transaction could be announced in a regulatory filing as soon as Thursday.
Sprint earlier this week announced that it had signed a deal with Japan's Softbank in which Softbank would acquire 70 percent of Sprint for $20.1 billion. Many analysts speculated that much of Sprint's appeal had to do with its relationship with Clearwire. In addition, there were reports that Softbank's lenders wanted assurance that Sprint would be able to control Clearwire as a condition of the financing of the deal.
Sprint currently holds 48 percent of Clearwire but does not control its board of directors. Until June of this year, the company owned a majority stake in Clearwire, however that interest fell below 50 percent as a result of Clearwire issuing more shares. Sprint also reduced its voting stake in Clearwire to below 50 percent in a bid to protect its balance sheet and clear the air with investors over potentially being held liable in the event that Clearwire defaulted on its debt obligations.
Now, however, Sprint's 48 percent ownership of Clearwire--nut lack of control--is considered a bit of a risk, according to the Journal, because Sprint sells service on Clearwire's network and needs to have access to its spectrum rights.
By gaining control of the Clearwire's board and securing a majority ownership, Sprint can alleviate those concerns without buying Clearwire. In addition, the deal would not preclude Sprint from buying Clearwire, once the Softbank acquisition has closed, the report said.
Comcast appears to be a likely candidate for some sort of deal with Sprint. In Clearwire's Sept. 27 Securities and Exchange Commission filing the company noted that Comcast had exchanged all of its Clearwire Class B common stock and Class B common units into 88.5 million shares of free-trading Class A shares.
When Softbank announced its planned 70 percent acquisition of Sprint earlier this week, both companies said that the transaction did not require Sprint to take any actions involving Clearwire "other than those set forth in agreements Sprint has previously entered into with Clearwire and certain of its shareholders."
Clearwire and Softbank are both using 2.5/2.6 GHz spectrum and TD-LTE technology for their LTE networks; Clearwire plans to launch LTE service next year. Sprint has said its LTE devices will be able to run on its FDD-LTE network as well as Clearwire's TD-LTE network, and Sprint will offload excess traffic onto Clearwire's network in dense urban areas. Clearwire has around 120 MHz of spectrum in many markets across the United States and Clearwire plans to use carrier aggregation technology in its forthcoming TD-LTE network to meld together it spectrum holdings into 40 MHz-wide channels. However, some analysts have noted that Softbank does not necessarily need to control Clearwire directly or indirectly to continue promoting the TD-LTE ecosystem.
For more:
- see this WSJ article (sub req.)
- see this Bloomberg article
Special Report: Softbank to take control of Sprint: Complete coverage
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