Clearwire Accepts Sprint Financing Making Its Dance With Dish Less Likely

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According to the Wall Street Journal, Clearwire (NASDAQ: CLWR) is expected to tap Sprint’s financing to carry out its operations. This is an interesting development because DISH’s bid for Clearwire was contingent on the company not drawing on its prior financing agreement with Sprint. For those that aren’t familiar, in January Clearwire announced that it received an unsolicited bid from DISH Network (NASDAQ:DISH) that topped Sprint’s offer by $500 million, coupled with an offer to buy 24% of Clearwire’s spectrum for $2.2 billion. DISH has also proposed a commercial agreement and capital assistance for Clearwire’s network build-out. DISH is offering $3.30 per share compared to $2.97 offered by Sprint for Clearwire.

See our complete analysis for Sprint

Clearwire Management Siding With Sprint

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While we aren’t surprised that Clearwire has decided to draw on its financing agreement especially after abstaining from borrowing in January and February. In a recent 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. However the WSJ clarifies that Clearwire hasn’t summarily rejected DISH’s offer and will consider all offers before making a decision. However, we believe with the Clearwire management going ahead with the borrowing, it is sending a strong signal to the minority investors that it is leaning strongly towards Sprint’s bid.

We believe DISH will not withdraw its bid of $3.30 a share and might drag Clearwire and Sprint into an expensive court battle.

Sprint Set To Win This Round

We now expect Sprint to be the new owner of Clearwire and this will help calm the fear of investors who were concerned that a loss of Clearwire would impact the Softbank-Sprint merger. In addition, DISH might now be forced to negotiate with Sprint to enter the wireless market and with Sprint clearly holding the advantage in any negotiations.

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