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Dish puts in bid for Clearwire at 11% per-share premium over Sprint Nextel’s offer

Sprint Nextel’s attempt to acquire the remaining stake in Clearwire that it does not already control seems to have hit a snag as Dish Networks has thrown its hat into the bidding ring with an unsolicited offer that is an 11% premium over the one currently on the table.

Clearwire reported that the Dish offer “provides for Dish to purchase certain spectrum assets from Clearwire, enter into a commercial agreement with Clearwire, acquire up to all of Clearwire’s common stock for $3.30 per share (subject to minimum ownership of at least 25% and granting of certain governance rights) and provide Clearwire with financing on specified terms.”

Clearwire noted that the offer was only a “preliminary indication of interest,” and subject to numerous conditions. However, the company’s special committee has decided to review the offer.

The offer calls for Dish to acquire approximately 24% of Clearwire’s total megahertz/pops of spectrum for $2.2 billion. Dish would also have the option to acquire or lease up to an additional 2 megahertz of spectrum adjacent to the spectrum being acquired at an additional cost.

Dish is also offering a commercial agreement with Clearwire that would call for Clearwire to construct, operate, maintain and manage a network for Dish and its 2 GHz spectrum holdings as well as new deployments for Clearwire’s 2.5 GHz spectrum.

More details of the offer can be found in Clearwire’s statement.

Dish last month garnered Federal Communications Commission approval to use 30 megahertz of spectrum in the 2 GHz band to launch terrestrial mobile services, would have to cover 40% of the population in those markets within four years and 70% of the market within 10 years. The company had initially wanted to have access to 40 megahertz, though the FCC decided that the remaining 10 megahertz, which was in the upper 1.9 GHz band adjacent to Sprint Nextel’s G-Block holdings, would be auctioned off. Winner(s) of those licenses would be required to meet power limitations as to not interfere with the G-Block, which Sprint Nextel is using for its initial LTE rollout, as well as to pay Sprint Nextel a “pro rata” share of expenses previously paid by the carrier in connection with clearing previous tenants in that band. That clearing was associated with Sprint Nextel’s 800 MHz re-banding efforts that provided the carrier with the 10 megahertz of G-Block of spectrum in exchange for spectrum assets in the 800 MHz band.

Dish has repeatedly said it plans to become a disruptive force in the mobile space, with its co-founder and chairman Charlie Ergen telling a crowd at the 2012 PCIA Wireless Infrastructure Show that the company was looking to enter the space through a partnership with an established carrier. Most of the nation’s larger operators have been cited as potential partners for Dish, including Sprint Nextel and AT&T Mobility.

Ergen acknowledged that entering the mobile space will not be easy, but noted that Dish has a history of entering markets thought to be tough to penetrate and has succeeded. Despite his enthusiasm, Ergen was adamant that the company was not “suicidal” and would not enter into a venture with no chance of survival. That could mean an eventual sale of its spectrum holdings should that outcome be most beneficial to its investors.

Clearwire in mid-December accepted an offer that would have Sprint Nextel acquire the remaining 50% of the company it does not currently control for $2.97 per share, or approximately $2.2 billion. That deal followed an offer by Japan’s Softbank to acquire a 70% stake in Sprint Nextel for $20.1 billion, which Sprint Nextel CEO Dan Hesse said was necessary in order to put in the offer on Clearwire.

Clearwire acknowledged that Dish had made overtures prior to Clearwire accepting the Sprint Nextel deal pertaining to acquiring certain spectrum assets at the same price per-megahertz/per-potential customer covered as the latest offer as well as entering into a commercial agreement with Clearwire. At that time, Clearwire’s board decided that the Sprint Nextel offer was more attractive for Clearwire’s non-Sprint Nextel Class A shareholders.

At stake from Clearwire is a cache of spectrum in the 2.5 GHz band that in some markets is in excess of 150 megahertz. While many have questioned the usability of that spectrum band to provide broad coverage, others have noted that the depth of those holdings would be a boon for a carrier looking to bolster capacity in high-density markets.

In response to the Dish offer, Sprint Nextel said it believes its offer is more beneficial to Clearwire shareholders as it does not include the conditions included in the Dish offer.

“In contrast, the Dish proposal includes a series of interdependent commercial agreements, debt and equity purchases and spectrum sales, which together with the other conditions required by Dish to complete the transaction, makes the proposal not viable,” Sprint Nextel noted in a statement. “In addition, the Dish proposal would require Sprint to voluntarily waive rights that it holds as a stockholder of Clearwire and that it possesses through various vendor and customer contracts that significantly predate Sprint’s proposed acquisition of the remainder of Clearwire. Sprint does not intend to waive any of its rights and looks forward to closing the transaction with Clearwire and helping consumers across the country realize the benefits of this combination.”

Clearwire noted the sticky position it’s in regarding Sprint Nextel’s current majority stake in the carrier.

“In response to the Dish proposal, Clearwire has received a letter from Sprint stating, among other things, that Sprint has reviewed the Dish proposal and believes that it is illusory, inferior to the Sprint transaction and not viable because it cannot be implemented in light of Clearwire’s current legal and contractual obligations,” Clearwire noted. “Sprint has stated that the Sprint agreement would prohibit Clearwire from entering into agreements for much of the Dish proposal.”

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