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DISH Network Bids for Clearwire

S DISH

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Yesterday, in a surprising move, DISH Network Corp. (DISH - Analyst Report) stated its keenness to purchase the remaining 49% stake of 4G WiMAX wholesaler Clearwire Corp. for $3.30 per share. DISH, the second largest satellite TV operator in the U.S., is desperately trying to enter into the lucrative wireless market. Recently, DISH Network got the FCC nod to install a nationwide wireless network using its 40 MHz spectrums, which the company purchased in 2011.

On the other side, Sprint Nextel Corp. (S - Analyst Report), the 51% shareholder of Clearwire has given a $2.97 per share bid to acquire the remaining 49% of Clearwire last month. Sprint has undertaken a massive project to expand its LTE network. DISH’s proposal is undoubtedly better than Sprint’s but it is contingent upon Sprint’s decision to waive its own shareholder right, which in all likelihood, the company will not do.

Secondly, DISH’s proposal, has a total consideration of $5.15 billion and includes several conditions. Per the conditions, the company must get at least 25% of Clearwire’s controlling stake to nominate board members, it will pay $2.2 billion to get a 24% stake of 2.66 GHz spectrum of Clearwire, Clearwire will build and manage a wireless network for DISH and DISH will provide an additional $800 million to Clearwire to terminate its financing deal with Sprint. 

Clearwire stated that a special committee of its Board of Directors will discuss the proposal with DISH. At the same time, the company also mentioned that the special committee so far, has not made any change to its recommendation on the already submitted offer by Sprint.

We reaffirm our long-term Neutral recommendation on both DISH and Sprint. Currently, both the companies enjoy a short-term Zacks #3 Rank (Hold) on their respective stocks. Clearwire also enjoys a short-term Zacks #3 Rank (Hold) on its stock.

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