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[Satellite TODAY 02-26-13] The true value of the wireless spectrum owned by Clearwire is two or three times higher than the value reflected in the price that cellular operator Sprint recently offered Clearwire to acquire the spectrum assets, according to an independent study published Feb. 26 by Information Age Economics (IAE).
IAE explained that Sprint’s $2.97-a-share offer for Clearwire represented a value of $0.21 per MHz-POP for Clearwire’s spectrum. In the study, IAE states that a more appropriate range for the value of Clearwire’s spectrum would be between $0.40 and $0.70 per MHz-POP based on comparable recent transactions and broadband market forces.
Crest Financial Ltd. commissioned the IAE study and attached it to a filing it recently submitted to the U.S. Federal Communications Commission (FCC), which also claimed that Sprint’s valuation of Clearwire failed to take into account that Clearwire’s 2.5 GHz Band is Sprint’s only remaining option to keep pace with national competitors Verizon, AT&T and T-Mobile.
Crest Finanical’s interest in the matter stems from its current 8.34 percent ownership of Clearwire’s outstanding Class A stock. The company recently sued Sprint and Clearwire’s board of directors for conspiring to intentionally lower the value of Clearwire’s high-speed, broadband spectrum so that it could acquire Clearwire at an artificially depressed price.
In its lawsuit, Crest stated that, “Sprint’s intentions are to the financial detriment of Clearwire’s minority shareholders, and contrary to the commercial interests of the public.”
Crest’s FCC filing also contends that the proposed Sprint/Clearwire merger would harm the public interest at a time of spectrum scarcity. “Crest contends that FCC approval of the proposed merger would delay spectrum deployment and exacerbate ‘spectrum crunch’ at a time of severe scarcity,” the company said in the filing. “The merger would contradict the FCC’s stated mission to maximize spectrum availability for public consumption. What’s more, it would place the country’s largest remaining spectrum portfolio in hands least equipped, by past example, to serve the best interests of the United States and its wireless consumers.”
Clearwire initially made its intention to sell off a portion of its 4G spectrum to Sprint known on a September 2011 conference call, during which the company’s CFO Hope Cochran said Clearwire gained strong momentum after launching its 4G wireless services, but not enough to generate sufficient cash reserves and prevent cost-cutting measures. The company nixed its plans to announce a formal spectrum sale after obtaining financing deals and settling a pricing dispute with its majority owner and largest wholesale customer Sprint Nextel.
At the time, Cochran said that the company would consider an offer made by interested buyers if the right opportunity arose. “The spectrum is a great asset, and we have a lot of it. It would be difficult to utilize all of it,” she said. “We had previously considered selling spectrum but ended up not needing thanks to friendlier debt markets. We understand that it is becoming more apparent that spectrum is a scarce resource and that these assets are rising in value.”
Cochran added that even with the spectrum obtained by the merger, AT&T would still be left with shortages. “Either separate or together, there’s still a spectrum constraint situation. That’s something we can help. We understand our relationship with Sprint may lead some to believe we’re in competition, but Clearwire has been trying to transform into the ‘Switzerland of capacity’ and we hope to provide spectrum to any carrier that needs it. We have started supplementing the WiMax 4G technology that well sell to Sprint with the LTE technology used by Verizon Wireless and AT&T,” she said.
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