Clearwire Agrees to Sprint Takeover

In December 2012, Sprint Nextel announced their plans to spend $2.2 billion to take over the Clearwire 4G mobile broadband network. The move will enable the expansion of Nextel's mobile network capacity. Sprint's acquisition will give them complete control of the company after a four-year joint venture with Clearwire.

Clearwire, which currently covers over than 130 million people in the United States, accepted Sprint's bid enabling the partner company to purchase almost 50 percent of the venture that they did not already own. Sprint will take advantage of the purchase to extend its capacity making it "more profitable and competitive" in the American market, explained Sprint CFO, Joseph Euteneuer.

Sprint has agreed to pay a sum of $2.97 per share for the remaining Clearwire stock; in increase of an earlier offer of $2.90 per share. The deal is yet to be approved by Clearwire shareholders, although many of the larger stakeholders have already indicated agreement, according to Clearwire CEO and President Erik Prusch. Bright House Networks, Comcast and Intel, combined owners of Clearwire's voting shares, have also agreed to the takeover. The deal also includes additional financing for Clearwater, in the form of $800 million in exchangeable notes.

Sprint officials announced that the company will integrate Clearwire's mobile spectrum into its network services with the ultimate aim of converting the Clearwire WiMax service to LTE. Clearwire currently has control of an average of 160MHz of spectrum in the leading American markets. Under the pressure of billions of dollars of long-term debt, the company is unable to go ahead with its previous plan to launch its own LTE network in 2013.

The Sprint takeover is subject to U.S. regulatory review and has a further contingency - the closure of the offer by Japan's Softbank, which wishes to purchase a 70 percent share of Sprint for the sum of $20 billion. Jeff Kagan, an independent telecom analyst claims that Softbank's offer is an indication of the company's determination to compete with two of the largest mobile carriers in the U.S. - Verizon Wireless and AT&T. "Softbank is gearing up for quite a battle with AT&T and Verizon," Kagan said in an email. Softbank wants to be a "major player" in the U.S. mobile market, he added.

With the new agreement, Clearwire's enterprise value stands at an estimated $10 billion; this includes spectrum lease obligations of $5.5 billion and the company's net debt. (CU) Link