Feature Article

February 28, 2013

Clearwire One Step Closer to Sprint Merger?

Though the decision does not appear to be irrevocable, Clearwire Corp. plans to accept about $80 million of financing made available by Sprint Nextel Corp. under their buyout agreement, a move that might not firmly preclude any rival bid made by Dish Network Corp., but might complicate Dish’s ambitions.

Some observers would say Clearwire is likely trying to force Dish to firm up its proposal, by taking an action that some earlier had believed would virtually foreclose any option other than agreeing to the Sprint buyout offer.

But that does not seem to be the case, or is at least unclear. Clearwire had seemed in the past to argue it could not take financing from Sprint as long as it was considering an offer from Dish Network, because of conditions set by the satellite TV provider.

Clearwire previously indicated that Dish has said it would withdraw its proposal if Clearwire drew on the funds made available by Sprint. Obviously, Clearwire is gambling that Dish will not do so.

As part of a December 2012 agreement, Sprint offered Clearwire $800 million in financing that it could draw on in installments of $80 million over 10 months.

The financing is in the form of debt that will be convertible to Clearwire shares in the event that Clearwire shareholders vote against Sprint's offer. So every installment that Clearwire accepts would further weaken its minority shareholders' clout in the future.

Clearwire already declined the $160 million of the Sprint financing in January and February, saying that it had to do so in order to review the Dish offer.

Clearwire has not explained how it could continue talks with Dish despite its apparent flouting of the conditions specified by Dish Network.

But Clearwire either has indications Dish Network will not back out, or simply is trying to get a firm offer from Dish Network that will cause Sprint to make a more-generous offer of its own.

Clearwire said it chose to draw the amount allowed for March 2013 under its agreement with Sprint, but it hasn't decided whether it will tap any future amounts under the accord.Sprint agreed in December 2012 to buy the shares in Clearwire that it didn't already own, and  at the time, it also agreed to provide up to $800 million of financing to Clearwire through notes that convert into stock.

Clearwire can sell Sprint $80 million of the notes each month for up to 10 months, an arrangement that gradually would give Sprint a bigger stake in Clearwire.

Edited by Brooke Neuman

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