The satellite TV operator DISH Network Corp. (DISH - Analyst Report) has decided not to pursue the acquisition of Sprint Nextel Corp. (S - Analyst Report) . In Apr 2013, DISH had made a counter bid of $25.5 billion to acquire Sprint, the third largest telecom operator in the U.S. In Oct 2012, Softbank of Japan made a $20.1 billion bid for Sprint. Recently, Softbank increased its offer price to $21.6 billion.
DISH announced that it will now focus on acquiring a 49% stake in the wireless wholesaler Clearwire Corp. . Sprint is the 51% shareholder of Clearwire. The battle for Clearwire started in Dec 2012, when Sprint proposed a $2.97 per share bid to acquire the remaining 49% of the former. In Jan 2013, DISH offered a counter bid of $3.30 per share. In May 21, 2013, Sprint hiked its bid to $3.40 per share to ensure favorable voting. However, DISH raised its bid to a substantial $4.40 per share of Clearwire, which is 29% higher than the revised bid of Sprint.
DISH’s proposal has a total consideration of $6.5 billion and includes three conditions. First, the company must get at least 25% of Clearwire’s controlling stakes to nominate board members. Second, DISH will pay $2.2 billion to get a 24% stake of Clearwire’s 2.66 GHz spectrum. Finally, Clearwire has to build and manage a wireless network for DISH.
DISH’s new bid contains another major issue. At present, Clearwire is reeling under a financing deal with Sprint in the form of convertible notes with a coupon rate of a mere 1% per annum. DISH has decided to pay an additional $800 million to Clearwire in order to terminate its financing deal with Sprint. In return, Clearwire should allow DISH to convert those notes into common outstanding shares of Clearwire at the rate of $2.50 per share.
In Jun 2013, the board of directors of Clearwire unanimously recommended its shareholders to accept DISH’s offer. The final decision will be taken at the Special Meeting of Stockholders on Jun 24, 2013. However, on Jun 17, 2013, Sprint filed a legal suit against DISH related to its proposed acquisition of Clearwire.
In May 2013, DISH executed a Letter of Intent with regional wireless network operator, NTELOS Holdings Corp. to deploy a fixed-mobile broadband network for high-speed Internet service in areas served by the latter. Accordingly, the two entities jointly launched broadband service across rural Virginia by utilizing 2.5 GHz band of airwaves on Jun 17, 2013.