Sprint Loots Clearwire for Spectrum

by Matt Klassen on December 18, 2012

As many in the telecommunications world expected, Sprint announced this week that it intends to purchase the remaining 50 percent of the shares in Clearwire it didn’t already own; the final nail in the coffin for Clearwire and its disastrous 4G WiMax wireless network project.

It should come as no surprise, therefore, to hear that Sprint acquired its long time wireless network partner for a relative steal, paying a paltry $2.97 per share, bringing the value of the entire deal to around $2.2 billion. But what could Sprint want from a company that failed to deliver the once vaunted adversary to the current 4G LTE standard?

As many might have guessed, the reality is that Sprint really wants nothing to with Clearwire itself, as its been nothing but a dead weight hanging around Sprint’s next for the last several years. Instead Sprint wants to acquire Clearwire so it can loot the corpse of its former partner for the only thing of value it has left: spectrum.

As mentioned, none of this really comes as any surprise, as Sprint has made no secret out of its desire to acquire Clearwire. Earlier this year Sprint bought out Eagle River Holdings’ stake in the company, giving the wireless provider majority ownership. Beyond that, the Japanese company Softbank, which recently announced its plans to acquire a majority stake in Sprint, has also been eyeing Clearwire and had stated its intention to gain control of the company as part of its burgeoning relationship with Sprint.

The closing cost of $2.97 per share is 128 percent of the price of Clearwire’s shares on the day these discussions began back in October, but is a discount on where Clearwire’s shares sat over the weekend, closing at $3.37.

In a statement released yesterday Sprint explained its reasoning behind the Clearwire acquisition, stating that such a deal with enhance Sprints’ spectrum portfolio, allowing the company to ultimately deliver better service to its customers while it continues the development of its 4G LTE network.

While such a deal between long time partners is so far going smoothly, needing only regulatory approval to commence, there were several others players initially that had the potential to make this far more complicated. Aside from Sprint, companies Intel, Comcast, and Bright House Networks all hold voting shares in Clearwire, although Sprint reported yesterday that all have agreed to the buyout.

Apart from its own regulatory approval, the deal is rumoured to be contingent on the approval of Softbank’s majority acquisition of Sprint as well, meaning that if the latter stalls or is rejected, the former will likely be as well.

In the end, don’t expect Sprint to do much with Clearwire, as the deal is shaping up as nothing more than a spectrum grab. Once Sprint has the resources it needs, expect to see the hollowed out husk of Clearwire kicked to the curb sometime in later 2013.

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Written by: Matt Klassen. www.digitcom.ca. Follow TheTelecomBlog.com by: RSS, Twitter, Facebook, or YouTube.

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