How Much Should Sprint Pay for Clearwire?

Agenda-Setting Financial Insight.
Dec. 13 2012 4:03 PM

How Much Should Sprint Pay for Clearwire?

Sprint is offering $2.1 billion for the 48 percent of Clearwire it doesn’t already own.

Photo by Joe Raedle/Getty Images

Sprint is taking on some starry-eyed activists. The U.S. mobile operator being acquired by Japan’s Softbank is offering $2.1 billion for the 48 percent of Clearwire it doesn’t already own. At $2.90 a share, the 5 percent premium to the closing price on Wednesday won’t satisfy uppity investors who want Clearwire to seek other options for its storehouse of wireless spectrum. Sprint’s control limits their power, but the activists could yet elicit a sweetener.

Between them, Mount Kellett Capital Management and Crest Financial own just over 14 percent of Clearwire. They sounded the alarm last month about the company possibly selling on the cheap to Sprint. Mount Kellett says AT&T bought somewhat comparable spectrum for about 38 cents per MHz-POP, a common industry measure of the number of people covered by the bandwidth. By their reckoning, Sprint should be paying at least four times as much for Clearwire. Though they would appear to have little clout given Sprint’s 52 percent stake in Clearwire, the minority owners aren’t being entirely quixotic. Sprint still needs more than half of other shareholders to sign off. And while Softbank may not yet be in control of Sprint, the Japanese company seems eager to embark on its U.S. ambitions. Clearwire’s spectrum is an integral component.

Sprint nevertheless retains the upper hand. Clearwire’s operating loss for the first nine months of the year exceeded $1 billion. While heavily indebted, Clearwire also desperately needs to roll out its next generation cellular network to keep up with rivals. That means its financial position is grim and getting worse. And with Sprint ultimately in control, there seems little chance of auctioning Clearwire’s spectrum - as the activists have urged - or selling equity to raise cash.

That means the only real option is to sell the company. For many reasons, Sprint is Clearwire’s natural partner. With a bid on the table that’s nearly three times where the stock was trading this summer, Clearwire’s non-Sprint owners can’t easily dismiss it. They can fight, but won’t get anything close to quadruple what has been put forward. They are, however, just enough of a nuisance that it’ll probably cost Sprint a little more to seal the deal.

Read more at Reuters Breakingviews.

Robert Cyran moved from the London office to New York, where he covers global technology, pharmaceuticals and special situations. Rob began his career at Forbes magazine, where he assisted in the start-up of the international version of the magazine.



The End of Pregnancy

And the inevitable rise of the artificial womb.

Doctor Tests Positive for Ebola in New York City

How a Company You’ve Never Heard of Took Control of the Entire Porn Industry

The Hot New Strategy for Desperate Democrats

Blame China for everything.

The Questions That Michael Brown’s Autopsies Can’t Answer


Kiev Used to Be an Easygoing Place

Now it’s descending into madness.


Don’t Just Sit There

How to be more productive during your commute.

There Has Never Been a Comic Book Character Like John Constantine

Which Came First, the Word Chicken or the Word Egg?

  News & Politics
The Slate Quiz
Oct. 24 2014 12:10 AM Play the Slate News Quiz With Jeopardy! superchampion Ken Jennings.
Oct. 23 2014 5:53 PM Amazon Investors Suddenly Bearish on Losing Money
Oct. 23 2014 5:08 PM Why Is an Obscure 1968 Documentary in the Opening Credits of Transparent?
  Double X
The XX Factor
Oct. 23 2014 11:33 AM Watch Little Princesses Curse for the Feminist Cause
  Slate Plus
Oct. 23 2014 11:28 AM Slate’s Working Podcast: Episode 2 Transcript Read what David Plotz asked Dr. Meri Kolbrener about her workday.
Brow Beat
Oct. 23 2014 6:55 PM A Goodfellas Actor Sued The Simpsons for Stealing His Likeness. Does He Have a Case?
Oct. 23 2014 11:47 PM Don’t Just Sit There How to be more productive during your commute.
  Health & Science
Oct. 23 2014 5:42 PM Seriously, Evolution: WTF? Why I love the most awkward, absurd, hacked-together species.
Sports Nut
Oct. 20 2014 5:09 PM Keepaway, on Three. Ready—Break! On his record-breaking touchdown pass, Peyton Manning couldn’t even leave the celebration to chance.