Sprint Nextel Upends Dish Network In Bidding Over Clearwire

Michael Teague |

SprintThe contentious bidding war between Sprint Nextel (S) and Dish Network (DISH) over the small wireless service provider Clearwire (CLWR) seemed one step closer to an endgame on Thursday.

The U.S.’s third largest wireless provider boldly upped its bid for the company to $5 per share, a 14 percent premium on the previous $4.40 per share offer from Dish. Clearwire’s board of directors did a prompt about-face by turning its back on the previous deal with Dish that until Thursday’s news looked as though it was all but complete.

Shares for Clearwire have gained tremendously since Sprint made its initial offer of $2.97 per share in December of last year for the half of the company that it does not already own, being up nearly 75 percent in 2013 to their current trading price of $5.05. The company sits on a particularly valuable portion of the domestic wireless spectrum and Sprint sees the acquisition as a means of snatching market share away from the two currently dominant wireless providers, Verizon (VZ) and AT&T (T).

But the purchase of Clearwire is also directly linked to the equally contentious bidding war between Dish and Japanese wireless firm SoftBank over Sprint itself. That contest appears to be all but over with Dish watching the 18th of June deadline it had been given to come up with a better offer pass in silence. For SoftBank, the acquisition of both Sprint and Clearwire would provide it with a strong debut on the U.S. wireless market. The Japanese company weathered a particularly nasty smear campaign during the bidding over Sprint, with Dish Network making very public and unfounded accusations about the firm’s ties to Chinese hacking operations. After prevailing in that deal, however, it looks as though neither SoftBank nor Sprint are in any mood to play nice with Dish and are seeking to administer a quick and fatal blow.

Clearwire was also the crux of Dish Network’s revitalization strategy, as cable television providers have been under increasing pressure on a number of fronts lately. Tech giants like Apple (AAPL) have been promising to revolutionize television, and online streaming services such as Netflix (NFLX), Amazon (AMZN), Hulu (a joint venture between Fox and NBC), and soon RedBox (CSTR) have made paying for cable increasingly unnecessary. Furthermore, consumer advocates and politicians alike have been pushing for the big cable companies to offer customers content on an “a-la-carte” basis, rather than charging exorbitant prices for vast packages of channels many of which will never be watched.

Dish's survival in an industry that is quickly being transformed by technological developments depends on its adding wireless to the services it provides so that it can sell customers bundled packages of phone, internet and cable television. Clearwire is/was key to this strategy because of the airwaves to which it has access.

But this is exactly the same reason for which the acquisition of Clearwire is/was essential to both Sprint and SoftBank. A purchase of Sprint alone, or even the fourth largest wireless provider T-Mobil US (TMUS) in its place would make little sense without access to Clearwire’s high-quality spectrum. Thus, for the time being at least Dish’s strategy seems to be dead in the water, with SoftBank and Sprint the big winners.

Clearwire, for its part, bucked the day’s massive sell-off, jumping 7.34 percent after accepting Sprint’s new offer. Dish dropped 0.23 percent to $39.18, while Sprint bumped up 1 percentage point to $7.07.

DISCLOSURE: The views and opinions expressed in this article are those of the authors, and do not represent the views of equities.com. Readers should not consider statements made by the author as formal recommendations and should consult their financial advisor before making any investment decisions. To read our full disclosure, please go to: http://www.equities.com/disclaimer

Companies

Symbol Name Price Change % Volume
AAPL Apple Inc. 112.97 0.79 0.70 35,011,961
AMZN Amazon.com Inc. 837.33 8.28 1.00 4,255,657
DISH DISH Network Corporation 54.80 -0.25 -0.45 2,179,562
NFLX Netflix Inc. 98.57 1.90 1.97 9,627,788
PANL Pangaea Logistics Solutions Ltd. 2.50 -0.13 -4.76 8,524
S Sprint Corporation 6.63 -0.03 -0.45 13,690,431
T AT&T Inc. 40.60 -0.13 -0.32 13,815,246
TMUS T-Mobile US Inc. 46.72 0.26 0.56 3,770,900
VZ Verizon Communications Inc. 51.96 -0.16 -0.31 9,387,482

Comments

Emerging Growth

GSV Capital Corp

GSV Capital Corp is an externally managed, non-diversified closed-end management investment company. The Company has elected to be treated as a business development company.

Private Markets

Cloudera

Cloudera offers enterprises a new data platform built on the Apache Hadoop open-source software package. Hadoop is a data-management platform that can consolidate data in a single repository for comprehensive…

Cross Campus

With over 500 members and operating 80,000 square feet by summer 2016, Cross Campus is one of the country’s top ten shared, collaborative office or "coworking" operators in the US.…