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Sprint Makes Moves to Consolidate Clearwire

Agrees to Buy Eagle River Shares, Pushes Voting Stake Past 50% 10/18/2012 8:08 AM Eastern

Sprint-Nextel wasted little time in trying to consolidate its holdings in WiMax provider Clearwire, agreeing to purchase more than 30 million shares from cellular telephone pioneer Craig McCaw in a deal valued at about $100 million.

According to an Oct. 18 Securities and Exchange Commission filing, Sprint has agreed to purchase 30.9 million Class A and 2.7 million Class B shares for $2.97 each, or about $100 million. The transaction pushes Sprint’s voting stake past 50%, effectively giving it control of the WiMax provider.

The deal comes days after Japanese wireless giant SoftBank agreed to pay $20.1 billion for a 70% interest in Sprint. Although boosting its Clearwire stake was not a requirement of the SoftBank transaction, the Japanese wireless giant had said Clearwire’s WiMax network was a critical piece of the deal.

Sprint had originally invested in Clearwire in 2008, contributing wireless spectrum in exchange for an equity stake which eventually grew to about 49%. Also as part of that deal, Comcast, Time Warner Cable, Bright House, Intel and Google invested a collective $3.2 billion to help Clearwire build out its WiMax network in exchange for an equity position valued at about $20 per share.

Clearwire did build its WiMax technology in several markets, but it soon ran into funding problems and was overshadowed by another wireless technology – Long Term Evolution (LTE) – which has become dominant in the wireless industry. Clearwire announced earlier this year its intention to build its own LTE network.

In the meantime, Time Warner Cable and Google sold their interests in Clearwire earlier this year for substantial discounts. Earlier this month, Comcast said it would convert its Class B shares in Clearwire into Class A shares,  a move that some analysts believed could be a first step toward a sale.

According to reports, Sprint has been in talks with the remaining partners, including Comcast, about purchasing their Clearwire stakes, but has hit snags over valuation. Comcast declined comment.

Clearwire shares, up more than 70% in the days leading up to the SoftBank announcement, were down 8.4% (19 cents) in early trading Thursday to $2.07 per share.

September