- FCC rejects DISH request for delay of Softbank-Sprint
merger.
- Clearwire emphasizes need for quick capital infusion else
forced to look at restructuring.
- Sprint needs Softbank merger to go through for capital
needs to back growth strategies
DISH Network's (
DISH
) request to the Federal Communications Commission (FCC) to
suspend review of the Softbank-Sprint (
S
) merger, until there is further clarity on the Clearwire deal
has been turned down. This means the review will progress as
scheduled after the merger is investigated by the DOJ, the
Federal Bureau of Investigation (FBI) and the Department of
Homeland Security (
DHS
), for any potential impact on national security, public safety or
law enforcement.
See our complete analysis for Sprint
Mixed Signals From Clearwire Management
To add to the existing corporate drama, in a proxy filing with
the SEC, Clearwire claimed if a merger with Sprint didn't happen
then the company would be forced to look at restructuring. This is
interesting because Clearwire hasn't summarily rejected DISH's
offer, and has gone on record saying it will consider all offers
before making a decision. However, we believe the proxy filing is
directed towards the minority shareholders of the company, who have
expressed their displeasure with Sprint's offer of $2.97 a share
and feel the board isn't doing its fiduciary duty by negotiating a
higher price for the company.
We believe DISH will not withdraw its bid of $3.30 a share and
would be willing to up the offer in a bidding war with Sprint. This
would potentially lead to a deadlock, as Sprint requires 75% of
Clearwire shareholders to sign off on the merger, and with
institutional investors clearly opposed to Sprint's lower offer,
Clearwire would be embroiled in fierce battle for survival.
SoftBank Merger Needs To Happen
After a poor Q4 2012 performance, we believe that Sprint needs
the Softbank merger to go through more than ever. With shrinking
market share in the postpaid segment, Sprint needs capital infusion
from Softbank to compete aggressively going forward. Sprint has
been incurring heavy annual postpaid subscriber losses for a long
time now, and it was expected that carrying the iPhone would plug
the leak. Unfortunately, this hasn't worked out for the company.
While Sprint has been showing net subscriber additions, losses from
the unwinding of Nextel far exceed gains.
It is evident that Sprint is losing market share and taking on a
huge commitment of nearly $15.5 billion to Apple over a four-year
period might have been a bad move in hindsight. This was a massive
bet considering the company has a highly leveraged balance sheet
with over $24 billion in long term debt and that the iPhone is
experiencing significant competition in the smartphone segment.
Sprint reported it sold 2.2 million iPhones in the fourth quarter
and 6.6 million in 2012.
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