By Sinead Carew and Liana B. Baker
NEW YORK, June 19 Sprint Nextel Corp (S.N)
should consider raising its offer price for Clearwire Corp
CLWR.O or risk being saddled with a contentious relationship
with Dish Network Corp (DISH.O), controlled by feisty
billionaire Charlie Ergen.
Shareholders of Clearwire, already majority owned by Sprint,
will vote on June 24 on Sprint's $3.40-a-share offer to buy the
rest of the company. But Clearwire's board has recommended
shareholders instead accept a higher, $4.40-a-share tender offer
If Dish's offer carries the day, Sprint would have some kind
of relationship with Dish, whether the satellite service
provider becomes a minority Clearwire shareholder or the two
agree to a network partnership. Either way, such an arrangement
could be fraught with difficulty for Sprint, analysts say.
“It would be a cultural shock for any company to be
partnered with Dish or to have any operating arrangement with
it,” said Brean Capital analyst Todd Mitchell, who pointed to a
string of Dish relationships that went sour or ended in court.
Both Dish and Sprint, which has itself agreed to be bought
by SoftBank Corp (9984.T), want access to a trove of wireless
airwave rights that Clearwire owns. SoftBank has also said that
it is important for Sprint to acquire the Clearwire spectrum.
But several Clearwire shareholders have already said they
are unhappy with Sprint's offer. [ID:nL2N0E21LK] Taran Asset
Management principal Chris Gleason said he would not vote for
Sprint's offer and that the vote would certainly fail on Monday.
Gleason, whose firm holds about 1 million Clearwire shares,
suggested that Sprint had two options. "You've got to do a
significantly higher bid or come to a deal with Charlie this
week," Gleason said, referring to Ergen.
Analysts also expect Sprint to suffer a defeat at the
shareholder meeting unless it raises its offer.
"Sprint and SoftBank should raise their offer for Clearwire
to a level that's clearly superior to the Dish offer based on
negotiations with major minority public shareholders," said Roe
Equity Research analyst Kevin Roe.
Dish and Sprint declined to comment for the story.
So far SoftBank has shrugged off concerns about having Ergen
as a minority shareholder even as a person close to Sprint said
having Ergen in Clearwire would make for "a very uncomfortable
SoftBank has said it could be content with Sprint owning
just 68 percent of Clearwire, which is a likely scenario if the
vote fails on Monday and only strategic shareholders with 13
percent of Clearwire shares approve the deal.
But that would present problems for Sprint. For starters, it
would miss out on "hundreds of millions of dollars" a year in
potential savings as Clearwire would remain a separate company
with its own board and a separate wireless network, according to
On top of that, Guggenheim analyst Shing Yin said that Ergen
could throw all sorts of obstacles in Sprint's way if he ends up
with a minority holding in Clearwire with a say on issues such
as commercial spectrum leasing agreements with Sprint - also
Clearwire's biggest customer.
"Dish has the potential to disrupt whatever plans SoftBank
has for Sprint and Clearwire," Yin said.
If Sprint doesn't want to raise its bid, Roe suggested that
it could try to forge an agreement with Dish to entice Ergen to
end his quest for a minority stake in Clearwire.
A deal could include a sale of some Clearwire spectrum to
Dish or entering a network sharing agreement where Dish can
offer wireless services using Sprint's equipment and wireless
airwaves that Dish owns, Roe said.
But even that arrangement may not sit well with Sprint. A
person who used to work for Ergen said that nearly every large
relationship the entrepreneur has had with a major company has
ended up being dissolved.
Most recently, Dish paid $700 million in cash last fall to
settle a breach of contract lawsuit with Cablevision Systems
Corp CVC.N over a failed joint venture called Voom.
Cablevision alleged that Ergen stopped paying for HD channels
Dish had agreed to carry for 15 years, before the end of the
Last year, Ergen also provoked a lawsuit from all the major
U.S. broadcasters because of a Dish video recorder called the
Hopper, which lets TV subscribers automatically skip recorded
ads. The Hopper could threaten revenue at the broadcasters, with
whom Dish has multibillion dollar programming deals.
Dish battled with SoftBank to buy Sprint itself but said
late on Tuesday that it would instead turn all its attention and
resources to efforts to buy a minority stake in Clearwire, as it
was unhappy with the Sprint process.
In the meantime Sprint is hoping for legal help. It sued
Dish and Clearwire earlier this week to try to block Dish's
tender offer. [ID:nL2N0ET1SL] But Guggenheim's Yin worried that
Sprint would be left in limbo during a prolonged legal case.
"If Sprint and SoftBank want Clearwire, they're going to
have to do more than filing this lawsuit," Yin said. Waiting for
a legal win could delay Sprint's turnaround, which is dependent
on a network upgrade that involves Clearwire spectrum, Yin said,
adding that SoftBank likely wants a resolution soon.
(Reporting by Sinead Carew and Liana B. Baker; Additional
reporting by Nicola Leske; Editing by Tim Dobbyn)
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Keywords: CLEARWIRE SPRINT/DISH
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