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Clearwire accepts $2.2B Sprint Nextel offer

Well, that didn’t take long.

Having a weekend to sleep on it, Clearwire today announced it would accept Sprint Nextel’s offer to acquire the remaining 50% of the company it does not currently control for $2.97 per share, or approximately $2.2 billion. The final price was a slight increase from Sprint Nextel’s first offer put on the table last Thursday for $2.90 per share, a price that many analysts said was insufficient considering Clearwire’s spectrum holdings.

With the deal, Sprint Nextel will gain 100% control of Clearwire, and more importantly Clearwire’s vast 2.5 GHz spectrum assets that are set to be part of Sprint Nextel’s LTE rollout plans. The deal also follows Japanese operator Softbank’s $20.1 billion offer to acquire 70% of Sprint Nextel, which is expected to close by mid-2013. The closing of the Clearwire deal is contingent on Softbank closing its acquisition of Sprint Nextel.

As part of the deal, Sprint Nextel also said it would provide “up to $800 million of additional financing for Clearwire in the form of exchangeable notes, which will be exchangeable under certain conditions for Clearwire common stock at $1.50 per share, subject to adjustment under certain conditions.”

Clearwire noted that the deal was a 128% premium compared with its stock’s closing price prior to confirmation of Softbank’s interest in Sprint Nextel, and a 40% premium compared with Clearwire’s stock price prior to receiving its first $2.60 per share non-binding offer from Sprint Nextel on Nov. 21. Those “premiums” are important as a number of analysts had initially thought the $2.90 per share priced offered by Sprint Nextel last week were on the low side and just the initial starting point for negotiations.

Despite notions from analysts that Clearwire might be able to garner a higher asking price, in the end it appeared that Sprint Nextel was clearly the company’s only suitor. This was highlighted by Clearwire’s inability to garner outside funding or a deal to sell off some of its “excess” spectrum assets it trumpeted several years ago when Sprint Nextel was playing hardball on providing financial assistance.

Clearwire CEO and President Erik Prusch said, “Our board of directors has been reviewing available strategic alternatives over the course of the last two years,” explained Erik Prusch, CEO and president of Clearwire. “In evaluating available alternatives, a special committee conducted a careful and rigorous process, and based on the committee’s recommendation, our board unanimously determined that this transaction, which delivers certain and attractive value for our shareholders, is the best path forward.”

Highlighting Clearwire’s current reliance on Sprint Nextel, the carrier noted that at the end of the third quarter a vast majority of the more than 10 million customers on its WiMAX network were signed up through services at Sprint Nextel. Clearwire’ has tried to diversify its customer base by signing deal with a handful of startups looking to offer inexpensive mobile broadband services.

Clearwire has been in the midst of a technology shift, migrating from its initial WiMAX deployment, which predominately powered Sprint Nextel initial “4G” service, to more recently announcing plans to begin deploying TD-LTE technology. That technology move is expected to receive a boost from Softbank, which is also in the process of rolling out TD-LTE services in the 2.5 GHz band as well as generate traffic from Sprint Nextel, which is looking to use that offering to densify its own LTE plans.

Sprint CEO Dan Hesse said, “Today’s transaction marks yet another significant step in [Sprint Nextel’s] improved competitive position and ability to offer customers better products, more choices and better services,” said Sprint Nextel CEO Dan Hesse. “[Sprint Nextel” is uniquely positioned to maximize the value of Clearwire’s spectrum and efficiently deploy it to increase [Sprint Nextel’s] network capacity. We believe this transaction, particularly when leveraged with our SoftBank relationship, is further validation of our strategy and allows [Sprint Nextel] to control its network destiny.”

While analysts were a bit shocked by the suddenness of the deal, they did note that it could prove beneficial to the tower market as Clearwire’s questionable funding had put a damper on the ability to get the carrier’s spectrum and need for towers into the market.

“As a result, we expect the capital to be deployed to roll out this spectrum,” said Jennifer Fritzsche, senior analyst at Wells Fargo Securities. “While it will take time for the towers to see this revenue impact it is a positive in terms of this sector’s longer term (2014 and beyond) revenue visibility.”

One of those impacted could be Crown Castle, which announced that Sprint Nextel and Clearwire currently accounted for 23% and 3% respectively of its annualized consolidated site rental revenues, and that both companies currently shared assets on 2,700 of Crown Castle’s sites.

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