Tales of the Sausage Factory

Ergen Makes Bid For CLWR After All, What’s Up With That?

Last Sunday, I noted that while Ergen was a potential bidder on Clearwire’s (CLWR) 2.5 GHz spectrum, it seemed unlikely given the fact that Sprint would still own a majority stake in CLWR and that governance issues would make this a very messy fight that would potentially tie up DISH assets when they are needed for its own network deployment and for a potential H Block Auction bid. I also noted a lot of other issues that make a purchase by anyone other than Sprint less attractive — such as the cost of network buildout — that cast serious doubt on Crest’s valuation of CLWR’s spectrum at $30 billion.

48 hours later, Ergen makes a bid for CLWR valuing CLWR at at $3.30 a share (a reasonable enough premium over Sprint’s offer to require serious consideration). Mind you, nothing in the bid (what details there are can be found here) contradicts anything I said previously. As noted by CLWR in it’s press release, the proposed deal comes with a bunch of conditions and caveats that reflect Sprint’s ownership and the cost of building out a network that would integrate with Ergen’s AWS-4 spectrum. Which naturally raises the question of why Ergen decided it was worth it to make the bid anyway. Making a serious tender offer — even if you think it will ultimately be rejected — is a non-trivial process that incurs expense. Before dismissing this as mere payback for Sprint’s (successful) push to amend the AWS-4 rules to protect H Block (creating delay in the approval and potential issues for deployment), it is worth considering what the potential upsides are to DISH that justify the cost.

Oh yeah, I should also talk about some consumer stuff and broader stuff as well. Horse race is all well and good, but there are a lot of industry folks that do that better than I do.

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Tales of the Sausage Factory

Crest’s Moronic Petition To Deny In Sprint/CLWR Symptom of Broader Idiocy That Actually Matters.

OK, I suppose I should really wait until they file, but this story detailing Crest Financial’s planned Petition to Deny in Sprint/Softbank/CLWR appears to be, in my humble opinion, the single dumbest grounds for a Petition to Deny. EVAR. For those just tuning in, Sprint, backed by Softbank, has offered approximately $3/share for the outstanding shares of Clearwire (CLWR). Because some analysts with no understanding of the actual spectrum market think CLWR is sitting on a spectrum pot ‘o gold, Crest is pissed and wants more money. It has already filed a shareholder derivative suit claiming that Sprint leveraged its insider position to buy out Clearwire below fair market value. Given how corporate law has crapped all over minority shareholder rights in recent decades, I am not giving this much hope. Apparently, Crest feels the same way, because they are now taking the fight to the FCC.

According to the story: “In going to the FCC, Crest will argue that the Clearwire deal artificially undervalues the company’s spectrum holdings, Schumacher said. That in turn potentially devalues future revenue for the U.S. government when it auctions off spectrum licenses.” Crest apparently thinks CLWR’s spectrum holdings are worth $30 billion, prompting me to wonder what planet they live on and whether they share it with House Republicans who keep thinking spectrum auctions are automatic pots of gold.

What makes this utterly dumb is the combination of a false factual premise combined with an utter lack of legal grounds, on top of a near zero chance of holding things up politically (unless AT&T or possibly DISH file, which might introduce greater political uncertainty). I would normally confine myself to simply snickering but there is a rather important point to be made here — especially for all those listening to analysts telling broadcasters they can make gajillions in the upcoming incentive auction –about spectrum valuations.

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