Sprint Nextel has offered to buy out the minority shareholders of
Clearwire for $2.1 billion in a deal that would give it total control of
the flailing company and also more space on the airwaves for data
services.
Sprint said in a regulatory filing Thursday that it's
offering $2.90 per share for the 49 percent of the wireless network
operator that it doesn't already own.
Clearwire's board hasn't
approved the sale, but said it's in discussions with Sprint. Clearwire
shares jumped 15 percent to close at $3.16 Thursday, suggesting that
investors believe a better offer may be coming.
It's been widely
assumed that Sprint, the country's No. 3 wireless carrier, would buy out
Clearwire. Both companies have been pressed financially, but Sprint is
getting an infusion of cash after selling 70 percent of itself to
Softbank Corp. of Japan for $20 billion. Clearwire shares nearly doubled
in value when that deal was announced two months ago, and got a further
boost on Tuesday, when The Wall Street Journal and CNBC reported that
Sprint and Clearwire were already in talks.
Clearwire, which is
based in Kirkland, Wash., was formed by cellular pioneer Craig McCaw to
take advantage of an emerging wireless technology, WiMax, which promised
higher speeds and lower costs than conventional cellular technology.
Sprint
was working on the same technology and in 2008, rolled those operations
into Clearwire, gaining a stake of more than 50 percent. Since then,
it's had a hot-and-cold relationship with Clearwire. Sprint uses
Clearwire's WiMax network to provide "Sprint 4G," but the technology has
been orphaned as other wireless carriers have opted for another
fourth-generation technology called "LTE." Sprint is now building out
its own 4G LTE network, something that Clearwire would do as well if it
had the funds.
Clearwire's main asset is vast swaths of wireless
spectrum, or space on the airwaves, that could be used to provide high
data download speeds - a crucial competitive factor in today's wireless
industry. However, Clearwire's frequencies are difficult to use: They
require many cell towers to cover an area, and the signals don't
penetrate well into buildings. Clearwire's weak financials had
threatened to drag Sprint down with it, and Sprint had reduced its stake
to less than 50 percent.
Soon after the Softbank announcement,
however, Sprint struck a deal to buy out McCaw's stake in Clearwire.
Remaining Clearwire investors include cable companies Comcast Corp. and
Bright House Networks, as well as chipmaker Intel Corp. Google Inc. sold
its Clearwire stake in February for $1.60 per share, and Time Warner
Cable Inc. sold in September at a similar price.
Sprint's offer
for Clearwire continues a wave of deal-making in wireless this fall.
Medium-sized players are trying to strengthen their hands to compete
with the top two, Verizon Wireless and AT&T Inc. Sprint's deal with
Softbank is part of that trend, as is No. 4 T-Mobile USA's deal to buy
No. 5 MetroPCS Communications Inc.
Sprint has 48 million subscribers that it bills directly, compared to 96 million at Verizon and 77 million at AT&T.
Clearwire
Corp. serves 10.5 million subscribers, but it only bills 1.4 million of
them directly. Almost all of the rest are using Sprint devices.
Shares of Sprint Nextel Corp., based in Overland Park, Kan., fell 2 cents to close at $5.64.