CLWR Clearwire Corp. - Class A (MM)

The third largest wireless operator in the U.S., Sprint Nextel Corp. (S) gained a favorable position in its pursuit to acquire Clearwire Corporation (CLWR) after the latter sought financing from the company. According to news reports, Sprint will provide $80 million to Cleawire in April under a funding agreement for network build outs, which leaves less scope for Dish Network Corp.’s (DISH) takeover plan for Clearwire to prosper despite its lucrative offer.   

In Dec 2012, Sprint inked an agreement to acquire the remaining 50% stake in Clearwire Corporation for $2.97 per share, amounting to a total of approximately $2.2 billion.  Following this proposal, in Jan 2013, Dish came up with a bid price of $3.30, totaling $2.28 billion to acquire Clearwire.

However, the financing arrangement between Sprint and Clearwire created significant uncertainty for Dish Network’s proposal.  According to news reports, Dish also hinted the withdrawal of its proposal if Clearwire took additional funding from Sprint as this would give Sprint the opportunity to increase its holding with every financing installment.  

If the deal materializes, Sprint will gain full rights over Clearwire. This implies access to Clearwire’s radio frequency spectrum ranging 2.5 GHz, utilized in providing services using the 4G 802.16e mobile WiMAX standard.

The acquisition will support Sprint’s multi-billion dollar restructuring program known as Network Vision. Through this plan, the company is concentrating on the core Sprint platform, which includes CDMA, WiMAX and Long-Term Evolution (LTE) technologies, and the eventual termination of the Nextel platform (iDEN business). Though the company has enough liquidity to address the growing cost of network upgrade, iPhone subsidies, debt maturities and working capital requirements, it needs to bolster its liquidity position for certain buyouts. The potential transaction would provide Sprint the financial support to build and improve its competitive wireless network.

However, the company is also struggling to deal with the loss of post-paid customers to other industry players such as Verizon Communications Inc. (VZ). This shrink in the subscriber base was primarily due to intense price competition, ineffective marketing, less favorable network quality and delay in the integration of back-office functions with its acquired units.

Sprint has a Zacks Rank #3, implying a Hold rating.
 

 
CLEARWIRE CORP (CLWR): Free Stock Analysis Report
 
DISH NETWORK CP (DISH): Free Stock Analysis Report
 
SPRINT NEXTEL (S): Free Stock Analysis Report
 
VERIZON COMM (VZ): Free Stock Analysis Report
 
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