Wireless Market Shenanigans: Clearwire Loses Out in Sprint Deal

The talk of the town is Softbank’s plan to buy about 55 percent of Sprint Nextel’s (NYSE:S) stock and take a 70 percent controlling stake in the company for $20.1 billion. Japan’s third-largest mobile operator will buy Sprint shares at a 36 percent premium to their most recent closing price before the announcement, or $7.30 per share. The deal will provide Sprint with $8 billion in capital aimed at reducing the company’s debt, and funding expansion of its fourth-generation wireless network. The combined entity will become the third-largest mobile operator in the world by revenue.

The mobile industry started buzzing with buy-out news when Deutsche Telekom floated ideas about buying MetroPCS (NYSE:PCS). Smaller carriers have been playing a game of acquisition cat and mouse as they look for ways to compete with Verizon Wireless (NYSE:VZ) and AT&T (NYSE:T), which dominate the market. Some of those merger talks involved Sprint’s possible take over of Clearwire (NASDAQ:CLWR), but Bloomberg is reporting that people with direct knowledge of the matter have said that “the companies can’t engage in extraordinary activities such as further mergers and acquisitions” until the deal is complete.

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The realization of this waiting period has caused shares of Clearwire to crash over 12 percent after surging on the speculation of a takeover. However, the stock is still trading above $2 for the first time since it sank below the price point in April of 2012.

“Sprint doesn’t need to own Clearwire now, as they already paid $900 million to lease the spectrum they need for 2012 and 2013,” said Robert Chapman of Chapman Capital. “Sprint may be better off buying 700 megahertz spectrum.”

Sprint already holds a 48 percent stake in Clearwire.

Meanwhile, the T-Mobile and MetroPCS merger could get tripped up by MetroPCS shareholders. The board has been accused of serving its own financial interests over those of the shareholders and the company by pursuing a deal that is “drastically undervalued.” Shareholders have filed a lawsuit claiming that the board has breached its fiduciary duty.

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