Sprint goes to court over Clearwire debacle

By Quantum Capital Fund

Since the recovery from the 2008 global financial crisis, the technology market has had little merger and acquisition activity, which typified the market before the crisis. This has put significant focus on the market where a lot of attention and media airtime will be given to transactions which would benefit the industry.

This was the case when Japanese mobile operator Softbank announced that it is was interested in purchasing a majority stake in Sprint Nextel. Following the Softbank offer, Dish Network made its own offer for Sprint, which Softbank later bettered.

This should have brought to close a saga, which captivated the industry since October. However, the completion of this deal came with the condition that Sprint acquires the remaining 50% stake of wireless broadband provider Clearwire, and all looked to be going according to plan until Dish Network again threw a spanner in the works when it made its own offer for Clearwire which is significantly better than that of Sprint. Now the country’s third largest mobile network provider is trying to impose legal action to prevent the deal.

Technology website cnet.com reports that Sprint announced in December that the two companies had agreed to a deal for the wireless carrier to acquire the 50 percent of Clearwire it does not currently own for $2.97 per share, or $2.2 billion. But Dish countered with a surprise unsolicited bid for Clearwire of $3.30 per share, or $5.15 billion.

Cnet adds that Sprint revised its proposal last month to $3.40 a share, edging Dish's offer by 10 cents a share, an offer Sprint called its "best and final." Two days before stockholders were scheduled to vote on Sprint's proposal, Dish came back with an offer that exceeded Sprint's by $1 a share, valuing the company at $6.3 billion. Clearwire's board of directors recommended last week that its shareholders accept Dish's takeover offer and scheduled a special meeting of stockholders for June 24, where a vote on Dish's offer is planned.

While all of the companies involved maybe welcoming the publicity and the free media attention, they need to bare in mind that there is a fine line between good publicity and publicity which could damage the company.

Sprint needs to find a resolution in this matter as soon as possible as the deal with Softbank will significantly benefit its user base. The benefits of increased funding into research and development, fresh ideas on how to grow market share as well as exposure to a new user base is too tempting to pass by. 

Sprint is faced with two options, the company can either sit down with Softbank or find another way to structure the deal which doesn’t depend on Clearwire or Sprint using their muscle to block the Dish Network deal and then wait for the courts to make their decision. Either way, the matter needs a quick resolution.