The tie up between Softbank, Sprint Nextel and Clearwire inched closer to fruition as late last week the federal government signed off on the deal, while today witnessed financial aspects of the transactions taken care of. Softbank said it expects the deals to be completed by July 10.
The Federal Communications Commission last week announced its final approval of Softbank’s move to acquire a 78% stake in Sprint Nextel for $21.6 billion as well as Sprint Nextel’s attempt to increase its ownership stake in Clearwire at $5 per share. More importantly for the future of this venture, the FCC did not require any spectrum divestitures in regards to Clearwire’s vast 2.5 GHz spectrum holdings. Those spectrum licenses have come under increased scrutiny as Sprint Nextel has tried to play down the value of those licenses in order to avoid potential divestitures.
The 2.5 GHz licenses have been seen as key to Softbank’s interest in Sprint Nextel as the approximately 150 megahertz of spectrum available in those licenses are set to provide deep support for Clearwire’s plans to rollout TDD-LTE services in that band. Softbank is already deploying the same technology across a similar band in Japan, thus including the Clearwire plans would drive significant cost savings.
A number of rivals have claimed that the FCC did not attach enough value to the 2.5 GHz licenses, noting that the depth of those licenses will provide the new Sprint Nextel with an unfair competitive advantage. AT&T noted in a blog post that the FCC decision was contrary to past decisions regarding spectrum screens as well as different from how the commission handled AT&T’s attempt to solidify its holdings in the 2.3 GHz space.
The Committee on Foreign Investment in the United States earlier this year gave its approval to the transactions after both Sprint Nextel and Japan’s Softbank agreed to enter into a “National Security Agreement” with the U.S. government that reportedly involves the inclusion of a four-member national security committee to oversee network operations. This was done to alleviate concerns regarding the use of infrastructure equipment from Chinese vendors across Clearwire’s network that Sprint Nextel and Softbank said would be removed by 2016.
The U.S. government had previously pressured Sprint Nextel to bypass the use of network equipment from Chinese vendors Huawei and ZTE for its ongoing Network Vision program citing national security concerns.
Financial questions
Sprint Nextel and Softbank announced preliminary results from a shareholder election, showing that just 3% of Sprint Nextel shareholders elected to trade in their stock for a piece of the new operations, with most electing to take their cash buyout and run. Further eroding potential confidence in the deal was the move by Standard & Poor’s Rating Services in cutting its long-term credit rating for Softbank to “BBB+” or what is termed a “junk” rating following the Sprint Nextel deal.
In its revised offer to acquire Sprint Nextel, Softbank noted that it would increase the amount of money it provided to Sprint Nextel investors at the cost of its initial investment into Sprint Nextel’s ongoing operations.
The final step in the Softbank/Sprint Nextel/Clearwire deals is a shareholder vote by Clearwire stakeholders in regards to the sale of an increase stake in the company to Sprint Nextel, which is scheduled to be completed today.
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