Overland Park, Kansas – Number-three cellular carrier Sprint entered into an agreement to purchase cash-strapped Clearwire for $2.2 billion to expand Sprint’s 4G LTE network capacity and compete more effectively against its two larger competitors, Verzion Wireless and AT&T.
Clearwire, which holds from 120MHz to 150MHz of spectrum in its markets, also gets a lifeline from Sprint, which agreed to provide up to $800 million of financing to Clearwire over 10 months beginning January.
Sprint previously signaled its plans to step up wireless competition recently when Japan’s number three carrier, SoftBank, agreed to buy a 75 percent stake in Sprint. Under the terms of that deal, SoftBank will spend $21.1 billion to acquire its 75 percent stake and provide Sprint with $8 billion to enhance its network and strengthen its balance sheet.
Both the Clearwire and SoftBank transactions are expected to close mid-2013, Sprint said.
Sprint wholesales Clearwire spectrum and already owns 50.8 percent of Clearwire, which also wholesales its spectrum to other companies. Despite owning a majority stake in Clearwire, Clearwire’s board was not controlled by Sprint and was free to do business as it choose, including wholesale agreements or asset sales, a spokesman noted.
Although Sprint wholesales Clearwire’s 4G WiMAX spectrum, Sprint has begun building a 4G LTE network using its own spectrum. Clearwire has also been planning to transition to 4G LTE.
For his part, Sprint CEO Dan Hesse said Sprint is “uniquely positioned to maximize the value of Clearwire’s spectrum and efficiently deploy it to increase Sprint’s network capacity.” The deal, he said, “marks yet another significant step in Sprint’s improved competitive position and ability to offer customers better products, more choices and better services.”
SoftBank’s acquisition itself has been seen by analysts as likely make Sprint a significantly stronger competitor in the U.S. and, in combination with T-Mobile’s planned acquisition of MetroPCS, offer consumers improved services at prices that will pressure the top two carriers.
Clearwire’s spectrum, combined with Sprint’s, “will provide Sprint with an enhanced spectrum portfolio that will strengthen its position and increase competitiveness in the U.S. wireless industry,” Sprint said. “Sprint’s Network Vision architecture should allow for better strategic alignment and the full utilization and integration of Clearwire’s complementary 2.5 GHz spectrum assets, while achieving operational efficiencies and improved service for customers as the spectrum and network is migrated to LTE standards.”
The Clearwire transaction was approved unanimously by Clearwire’s board after a recommendation by a special committee consisting of disinterested directors not appointed by Sprint, the companies said. Clearwire has also received commitments from cable operators Comcast Corp., Intel Corp and Bright House Networks LLC, who collectively own about 13 percent of Clearwire’s voting shares, to vote in support of the transaction. SoftBank also approved the transaction, as required by its recently announced merger agreement with Sprint.