Dish Network Corp. (DISH)’s counterbid for Clearwire Corp. (CLWR), which already agreed to a buyout by majority shareholder Sprint Nextel Corp. (S), has analysts wondering about Dish Chairman Charlie Ergen’s motivations.
The $3.30-a-share offer may disrupt Sprint’s proposal to acquire full control of the wireless network operator’s stock at $2.97 apiece. While it has made no decision to reconsider Sprint’s offer, Clearwire said it plans to talk to Dish and will keep its options open by not drawing on financing offered by Sprint. The Dish bid values Clearwire at about $5 billion.
Dish, a satellite-television company that’s expanding into the mobile-phone business, already has airwave licenses that it could use to offer wireless downloads and voice calls. Ergen’s company has been looking to bring those services to consumers by seeking partners with network equipment and tools, assets that Clearwire doesn’t have and Sprint does.
“It’s hard for me to imagine that what Dish wants is Clearwire,” said Craig Moffett, an analyst at Sanford C. Bernstein & Co. in New York. “It could be a chess move to get a partnership with Sprint.”
Dish may offer to rescind its Clearwire bid if Sprint agrees to a partnership, Moffett said. It’s also possible that Dish is seeking any way it can to control a wireless company, and Clearwire is the only option, he said.
Clearwire rose 7.2 percent to $3.13 at the close in New York, signaling that investors expect Clearwire to fetch a higher price than Sprint’s current offer. Dish’s bid was 13 percent above Clearwire’s closing price yesterday of $2.92.
Dish rose 2.4 percent to $36.85. Sprint fell 1.5 percent to $5.88.
As part of the deal, Dish offered to pay about $2.2 billion for 24 percent of Clearwire’s spectrum. The transaction would require Clearwire shareholders to sell at least 25 percent of the stock and wouldn’t be dependent on Sprint’s participation.
“We look forward to working with Clearwire’s Special Committee as it evaluates our proposal,” Tom Cullen, Dish executive vice president of corporate development, said in a separate statement. The Englewood, Colorado-based company declined to comment further, as did Mike DiGioia, a Clearwire spokesman.
A complete takeover of Clearwire would be impossible without cooperation from Sprint, which owns more than 50 percent of the shares. Even so, Clearwire will have to consider the offer, said Walter Piecyk, an analyst at BTIG LLC in New York.
“Ergen made a clearly superior offer and Clearwire’s special committee needs to do their job and evaluate it,” he said.
Clearwire (CLWR) may not have much choice in the matter. Sprint, based in Overland Park, Kansas, said yesterday it wouldn’t relinquish its rights as a Clearwire shareholder to allow Dish’s bid to be completed. Sprint’s offer is superior to Dish’s, the company said in a statement.
“There’s no way Dish can do it,” said Roger Entner, an analyst at Recon Analytics in Dedham, Massachusetts. “They just want to throw a wrench in the deal. So what if they buy a portion of the shares? Sprint still owns the rest.”
Ergen has said he wants more spectrum -- the airwaves that let mobile devices operate -- to compete with AT&T Inc. and Verizon Wireless in the mobile-phone business. Last month, the Federal Communications Commission approved Dish’s plan to use 40 megahertz of spectrum for mobile voice and data services.
“It’s just like oil, water, or gold -- you can’t have enough good spectrum,” Dish Chief Executive Officer Joseph Clayton said yesterday in an interview with Bloomberg TV.
That ambition has alternately put Ergen at odds with Sprint and in talks to work with the third-largest U.S. wireless carrier, which has its own plans to mount a tougher challenge to its larger competitors.
Sprint approached Dish last year about hosting the satellite company’s wireless spectrum on its mobile towers, according to people familiar with the talks. A partnership would allow Dish to put to use its wireless airwaves while splitting the revenue with Sprint, the people said.
At around the same time, Sprint (S) was urging the government to put limits on Dish’s spectrum because of potential interference issues with airwave licenses the government plans to put up for bid this year. The FCC sided with Sprint.
A Clearwire acquisition could also make Dish more appealing as a future target for a larger company seeking spectrum, such as AT&T or DirecTV, Amy Yong, an analyst at Macquarie Securities in New York, said in an interview.
“We’re continuing to analyze and look at multiple different options, and I think that’s what a good company is supposed to do,” Clayton said.
Ergen has been known to make bold moves that factor in to later negotiations. Dish dropped AMC Networks Inc. from its satellite-TV lineup in July, only to reinstate the network group several months later as part of a settlement in relation to a prior lawsuit.
Dish is willing to spend billions of dollars on wireless as the pay-TV business stagnates, Ergen said in an October interview. The company made a failed attempt in August to buy mobile-phone carrier MetroPCS Communications Inc. for about $4 billion, according to company filings.
Sprint decided to acquire 100 percent of Clearwire in December after their four-year joint venture struggled to build a nationwide wireless network, leading to billions in losses for Clearwire. Sprint aims to take over Clearwire’s spectrum and use it to enhance its own network. Sprint CEO Dan Hesse said last month that the deal was “critical” to turnaround efforts at the third-largest U.S. wireless carrier.
The $2.97-a-share offer had to be approved by Japan’s Softbank Corp., which agreed in October to buy 70 percent of Sprint for about $20 billion. Softbank wouldn’t allow a bid above $2.97 a share, people familiar with the negotiations said last month.
That requirement may now be put to the test if Sprint contemplates raising its bid, Piecyk said.
“We continue to believe that Clearwire was a critical element of Softbank’s interest in Sprint,” he said.
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