The third largest wireless operator in the U.S.,
Sprint Nextel Corp.
) gained a favorable position in its pursuit to acquire
) 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.
) takeover plan for Clearwire to prosper despite its lucrative
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.
CLEARWIRE CORP (CLWR): Free Stock Analysis
DISH NETWORK CP (DISH): Free Stock Analysis
SPRINT NEXTEL (S): Free Stock Analysis Report
VERIZON COMM (VZ): Free Stock Analysis Report
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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.
). 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.