Clearwire accepts Sprint’s offer, but still at low price

Sprint will pay $2.97 per share to gain full control of the 4G joint venture but many think the spectrum is being undersold

Clearwire has accepted a slightly upgraded offer for full control from Sprint, at $2.97 per share. Up from the original bid of $2.90, the new proposal values the transaction at $2.2bn and has been approved by Softbank of Japan, which is seeking approval for its own bid to buy 70% of Sprint for about $20bn.

The Japanese operator is said to have strongly favored the full takeover of the Clearwire joint venture, which has huge stocks of 2.5GHz spectrum, in which it runs WiMAX and is building out TD-LTE. Softbank is also deploying TD-LTE in Japan in the same band, and is part of a roaming and device initiative with Clearwire, China Mobile and others. Its influence, even before the deal with Sprint is finalized, is likely to have made the US cellco give greater priority to Clearwire within its complex 4G network and spectrum strategy.

Sprint currently owns 52% of Clearwire, though does not have majority voting rights, and has won over other major shareholders including Intel, BrightHouse and Comcast, which own 13% between them.

However, smaller investors may be less impressed. The deal has already provoked a challenge from one, Mount Kellett Capital Management, which owns 3.6% and last week said the initial $2.90-a-share offer “grossly” undervalued Clearwire’s stocks of spare spectrum. Those frequencies could greatly increase Sprint’s capacity for mobile broadband and for offload from its main LTE network. And Crest Financial, which owns about 3%, filed a lawsuit to block sale to Sprint and is now seeking to extend that to a class action.

Many analysts were surprised the price was not pushed up higher still, with some speculating it would have to top $5 to reflect the spectrum’s value.

“Sprint’s Network Vision architecture should allow for better strategic alignment and the full utilization and integration of Clearwire’s complementary 2.5GHz spectrum assets, while achieving operational efficiencies and improved service for customers as the spectrum and network is migrated to LTE standards,” said Sprint and Clearwire in a joint release. They said the merged firm will deploy TD-LTE in line with Clearwire’s current plan while Sprint will continue with its own multiband FD-LTE plan. But Sprint is expected to decommission Clearwire’s network over time, reported Reuters.

While the merger will help Samsung – the only vendor in common to both operators’ LTE projects – consolidate its US position, it could put even more pressure on Huawei, which is a supplier to Clearwire but was excluded from Sprint’s Network Vision program at the eleventh hour, because of pressure from government agencies citing security concerns.

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