SoftBank/Sprint Clearwire Acquisition Rumors Deflated
Anonymous sources tell Bloomberg News
that Sprint has no plans (yet) to fully acquire Clearwire after Sprint itself was recently acquired by Japanese carrier SoftBank. Sprint currently owns a 49% stake in Clearwire and faces no pressure for full ownership given they've already paid Clearwire $900 million to lease needed spectrum. That doesn't mean a SoftBank/Sprint acquisition of Clearwire won't happen, but sources insist the immediate focus over the next year will be to close the SoftBank acquisition of Sprint.
Clearwire stock immediately soared on rumors they'd be acquired next, but plummeted today as investors either cashed out of the wave and/or realized the rumors wouldn't be materializing anytime soon. Interestingly, Tim Farrar at TMF Associates
posits that some of the technicals behind the deal (specifically Sprint's decision to issue an immediate $3 billion convertible bond to SoftBank) were designed to fend off a Clearwire acquisition play from Dish's Charlie Ergen:
So the obvious question is why did Sprint need to issue a $3B convertible bond to Softbank right now? I think that can only be intended to warn off others from doing a deal with Clearwire in the interim, by offering John Stanton the carrot of improved economics and/or further investment from Sprint. Of course there are not many options for Clearwire to sell spectrum, now that T-Mobile and MetroPCS, the two operators most frequently rumored to have designs on Clearwire’s spectrum, are getting together.
As a result, I think Sprint’s actions appear to confirm that Clearwire was about to pull the trigger on a deal with Ergen, as I suggested last month, involving an asset sale and/or WiMAX customer transfer, in exchange for a combination of cash and debt. Notably, receipts from a sale of network assets (as opposed to a spectrum sale) would not have to be used to repurchase Clearwire’s first lien debt, suggesting that this could be a preferred way for Clearwire to raise funds. In addition, I’m told Ergen now holds in excess of $900M of Clearwire’s debt (not all first lien), and some of that could potentially have been traded for Clearwire spectrum.
Ergen had been buying up Clearwire debt and talking incessantly about the need for a possible partner to make their planned "Ollo" branded LTE service a reality. Rumors of a possible Clearwire acquisition by Dish have been bubbling up since last year