Sprint Nextel Corp. (S) is studying strategic options for its wireless partner Clearwire Corp. (CLWR), including a full takeover of the business, according to two people with knowledge of the situation.
As part of the discussions, Sprint is in talks to buy out Clearwire’s minority shareholders, said the people, who declined to be identified because the talks aren’t public. Sprint, which owns more than 50 percent of Clearwire, agreed to buy Eagle River Holdings LLC’s 4.5 percent stake in the business in October for $2.97 a share. A $3-a-share value will serve as a benchmark for future transactions, one person said.
A deal may be announced by the end of the year, though talks could still fall through, according to the people. The discussions follow remarks by Sprint Chief Executive Officer Dan Hesse in October that buying out more investors in Clearwire was under consideration. Sprint, the third-largest U.S. carrier, is getting an influx of cash from Japan’s Softbank Corp. (9984), which agreed to buy 70 percent of Sprint for about $20 billion.
“Any time there’s an opportunity at the right price to take out a strategic investor, we will,” Hesse said in an interview after the Softbank deal was announced in October.
Scott Sloat, a spokesman for Overland Park, Kansas-based Sprint, declined to comment on speculation, as did Mike DiGioia, a spokesman for Bellevue, Washington-based Clearwire.
Clearwire shares jumped 12 percent to $2.68 today after CNBC first reported on the Sprint talks. The stock is up 38 percent this year.
Sprint said last month that it would be delaying the filing of the proxy statement describing the Softbank deal until Dec. 21. That move allowed the company to continue the talks with Clearwire, one of the people familiar with the matter said. The filing might be postponed again as the discussions go on, according to the person.
Sprint originally formed the Clearwire joint venture in 2008, relying on $3.2 billion in investments from Google Inc. (GOOG), Intel Corp., and cable companies such as Comcast Corp. and Time Warner Cable (TWC) Inc. The idea was to build a national wireless network that could compete with Verizon Wireless and AT&T Inc. (T)
Clearwire never lived up to those ambitions, and the project has yet to break even. Along the way, partners such as Google and Time Warner Cable have sold their stakes for a fraction of their original value.
Still, Clearwire owns a broad swath of airwaves that blanket the country. Having full control of those assets would help Sprint shore up its wireless network at a time when smartphones and tablets are fueling a surge in data traffic.
“With Clearwire’s spectrum and Softbank’s cash, Sprint could finally differentiate itself with the fastest networks and enough capacity for some very compelling pricing,” said Walt Piecyk, an analyst with research shop BTIG LLC in New York. “This could make for a very interesting wireless industry in the United States.”