Sprint Chases Clearwire Buyout Deal

Sprint Nextel has made a US$2.1 billion offer for the shares of Clearwire that it doesn’t already own, according to a regulatory filing. The news comes after rumors surfaced earlier this week that the company was in talks with Intel and Comcast to buy out their stakes.

The offer, which works out to $2.90 per share, also comes with interim financing of $800 million for Clearwire, if it agrees to the deal. Clearwire has said it is under review.

Clearwire may well hold out for a better offer from Sprint, which has to get Softbank to sign off on any agreement. Earlier this year, the two companies inked a deal that will give Softbank a 75 percent stake in Sprint.

There are numerous reasons for Sprint’s eagerness to acquire Clearwire — and it may thus be amenable to some back-and-forth negotiations.

Catching Up With LTE

For starters, Sprint is behind on developing its own LTE infrastructure, noted Andreas Scherer, managing partner of Salto Partners. It offersLTE in more than 30 cities — but that is a low number compared to Verizon, which is able to offer LTE in more than 400 cities, as well as AT&T, which is expected to reach 100 cities by the end of 2012.

Acquiring Clearwire wouldn’t make Sprint the lead provider — Clearwire provides 4G mobile broadband service in approximately 80 cities across the U.S., according to its site — but it would give Sprint an important nudge, Scherer said.

There is also Clearwire’s intrinsic value — it has a market capitalization currently around $1.92 billion.

“The company has about 160 MHz of spectrum in the majority of its current markets,” noted Scherer. “That is more than it will need anytime soon to do business. The unused spectrum could bring in between $6 billion and $9 billion.”

This deal is all about spectrum and staying competitive, Andy Abramson, CEO of Comunicano, told the E-Commerce Times.

“Now, with T-Mobile acquiring MetroPCS, they will fall farther behind — so they either have to buy Cricket or Clearwire,” he said.

“Since they already own a large percentage of Clearwire and have customers today using the Clearwire mobile WiMax service when roaming with similar technology, the purchase would give them broader reach [and] allow them to keep all the revenue while refarming the spectrum over to LTE,” Abramson explained.

A Competitive Boost

Acquiring Clearwire would also give Verizon and AT&T a heads up that Sprint — with its forthcoming stake from Softbank — is serious about becoming a major player, said Bruce White, professor of computer information systems at Quinnipiac University.

As the majority owner of Clearwire, Sprint will be able to clear out the deadwood there and put its own aggressive strategy in motion, he told the E-Commerce Times.

“This move will put Verizon and AT&T on notice that the competitive landscape is changing,” he said, “and that an assertive and risk-taking new company is moving into the neighborhood.”