Update: Sprint Nextel has made a $2.1 billion bid to acquire the 49% of Clearwire it does not own.
Will they or won’t they? That’s the question investors in Clearwire (CLWR) have been asking for weeks (months, years?) about Sprint Nextel, Clearwire’s majority owner. Ever since the nation’s No. 3 carrier agreed to be acquired by Japan’s Softbank, investors have been waiting for Sprint Nextel to put its house in order by buying the 49% of Clearwire that it does not already own. Now CNBC is reporting that Sprint Nextel is trying to buy out a number of Clearwire’s other shareholders, including Comcast, Bright House and Intel.
Comcast and Bright House are both part of the SpectrumCo consortium that recently sold 1.7/2.1 GHz (advanced wireless services, or AWS) spectrum to Verizon Wireless, so they are clearly no longer in spectrum-acquisition mode. And Clearwire’s legacy WiMAX technology has lost out to LTE (which Clearwire is in the process of migrating towards, pending sufficient funds), making the venture much less promising that it was four-and-a-half years ago when the partners initially invested. So it seems likely that complications related to the pending Sprint Nextel/Softbank deal are more likely to hold up any potential sales than is reluctance on the part of the sellers.
The value of Sprint Nextel shares post-acquisition could take a hit if the company does acquire Clearwire. “We would view a potential buyout of [Clearwire] minorities over the next couple of months as a clear negative for Sprint stock over the next year,” said analyst Kevin Smithen of Macquarie Securities. “We believe that Sprint is already planning to ask its investors to tolerate higher [capital expenditures] and lower free cash flow in 2013. Additional free cash flow dilution in 2013 and 2014 from [Clearwire] capex and interest costs may be more than many investors are willing to put up with.”