Is Sprint Set to Challenge AT&T and Verizon?

After several shareholders, including Mount Kellett, declared Sprint’s (NYSE:S) first offer of $2.1 billion for Clearwire (NASDAQ:CLWR) too low, the wireless carrier returned with a second bid; this time, the proposal of $2.2 billion, or $2.97 per share, was accepted by the company’s board.

What are the Deal’s Particulars?

As Reuters reported on Monday, the third largest U.S. wireless carrier “wants Clearwire’s substantial spectrum to better arm itself against larger rivals Verizon Wireless and AT&T Inc.”

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But for Clearwire, the acquisition was the company’s only choice; it has over $4.2 billion in debt and needs financing to upgrade its network to 4G. Despite the difficult circumstances in which the company is mired, Sprint’s original bid of $2.90 per share, or 5.5 percent of the stock’s closing price on Wednesday, was deemed “outrageous” by Mount Kellett in a letter to the company’s shareholders last week.

While Sprint’s second offer was still far below the value Mount Kellett said Clearwire was worth, $6.30 per share, the deal now has the unanimous backing of the company’s board. Comcast (NASDAQ:CMCSA), Intel (NASDAQ:INTC), and Bright House Networks, which together own approximately 13 percent of Clearwire’s voting shares, were in favor of the takeover.

According to The New York Times, Clearwire’s board approved the offer based on the recommendation of a special committee of directors.

Sprint’s bid was limited to $2.2 billion because Softbank (SFTBF.PK), which recently agreed to purchase a 70 percent stake in the company, would not allow the company to offer more than $2.97 per share.

CHEAT SHEET Analysis: Is Clearwire a Positive Catalyst for Sprint’s Stock?

One of the core components of our CHEAT SHEET Investing Framework focuses on catalysts that will move a company’s stock. Currently, Sprint lags far behind the market leaders AT&T (NYSE:T) and Verizon (NYSE:VZ). With the acquisition of Clearwire, Sprint will have access to Clearwire’s broad stretch of airwaves. As Bloomberg reported, this spectrum would give Sprint “the ability to improve its own network and handle a surge of traffic generated by smartphones and tablets.” Because of the influx of funds the company received from its deal with Japan’s Softbank, Sprint now has the opportunity to expand its spectrum assets.

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