SoftBank/Sprint Decision Could Fall on Clyburn’s Watch
Monday was day 154 of the commission’s unofficial 180-day shot clock for review of SoftBank/Sprint. Following the schedule, the commission would be on target to make a decision in early June, as Clyburn’s tenure as chairman likely gets under way. But, industry officials said Monday confirmation of Tom Wheeler as chairman appears unlikely before late summer, and that could mean the deal could be all but wrapped up and waiting for FCC action for several months if the agency waits for Wheeler. In April, Dish made a counteroffer for Sprint worth $25.5 billion (CD April 16 p1) . Last year, Sprint accepted an offer from SoftBank, a $20.1 billion bid for 70 percent ownership.
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"I believe FCC action on Softbank/Sprint/Clearwire is eminently doable under soon-to-be acting chairman Clyburn, and I would be surprised if did not happen on her watch in that capacity,” said Jeff Silva, analyst at Medley Global Advisors. “I assume staff work on the transactions is nearly complete and there are business considerations associated with completing the government review in a timely manner. It would seem to present a hardship on key stakeholders to delay regulatory action until a new FCC chairman is in place, which might not be until late summer or so. Having said that, all bets would be off if Dish’s counteroffer were to gain traction. At this point, though, Dish is appears to be facing hefty headwinds and a cruel clock tick on that score."
"Technically, the FCC doesn’t care about the counteroffer because it only looks at the application in front of it,” said Public Knowledge Senior Vice President Harold Feld. “Realistically, I don’t think there is much drive to do anything unless Sprint rejects Dish’s offer. On the other hand, I expect the Sprint special committee will decide sooner than early June if the Dish offer is good enough to require SoftBank to raise their asking price.” The FCC would be pleased if Dish or SoftBank buys Sprint and a stronger carrier emerges, Feld said. “I don’t think the FCC will try to rush SoftBank’s application as long as Dish remains in play, but I don’t think the FCC wants to see Sprint paralyzed during a lengthy bidding war, either. At the end of the day, the FCC can approve Sprint/SoftBank and Sprint shareholders could reject it if the Dish offer appears superior."
But current and former FCC officials said it’s too early to say what Clyburn would do given uncertainty over what company will get Sprint. One former official said SoftBank/Sprint could be approved on delegated authority as a joint Wireless-International bureau order. “If the Dish offer is accepted, all bets are off,” the official said. “The new parties start from scratch.”
Meanwhile, Clearwire notified shareholders Monday its board has reviewed Sprint’s bid for the company and views it as “the best strategic alternative for stockholders.” Clearwire shareholders are to vote May 21. The letter noted that the offer translates to an “attractive” offer of 21 cents/MHz/POP for Clearwire spectrum. “The proposed $2.97 per share offer price equates to a total payment to Clearwire minority stockholders of approximately $2.2 billion,” the letter said (http://bit.ly/gXVGzY). “This transaction represents a total Clearwire enterprise value of approximately $10 billion, including net debt and spectrum lease obligations of $5.5 billion.” The letter doesn’t mention Dish’s unsolicited offer in January of $3.30 per share for Clearwire.
Analysts at New Street Research said Monday many questions remain about the future of Sprint. “We're convinced that the SoftBank offer is better than the Dish offer as it stands. However, we don’t think it’s going to matter,” said New Street analyst Jonathan Chaplin on a call with investors. “We think the Dish offer is good enough for shareholders to vote against the current deal.” Dish has to formalize its offer first and shareholders are unlikely to vote against the SoftBank offer “unless there’s a firm and binding alternative,” he said. “We assume that Dish is going to formalize their bid following due diligence.” Chaplin said SoftBank would have to pay another $3 billion to match Dish’s offer. He said Dish is unlikely to raise its offer by more than 5 or 10 percent.
As things stand now, the Sprint board is likely to accept the SoftBank offer “as a lower risk offer, but this is by no means assured,” Chaplin said. Even if the board approves SoftBank/Sprint, there is “a really good chance” shareholders will vote no, he said. While shareholders appear divided, Chaplin said that, based on interviews, most appear open to a Dish offer unless SoftBank ups its ante.
Dish likely has the capability to finance its offer for Sprint, but there are problems, Chaplin said. “We think one of the challenges that Dish faces is that the offering record that they have in their own pay-TV business makes us question whether they have the capabilities to win in wireless,” he said. “Dish has created a ton of shareholder value over the last five years, but it hasn’t been through operations, it’s been through dealmaking.” It would require significant investment in Sprint “to unlock the value that’s there,” he said. Chaplin said another problem is that Dish brings spectrum to the table but not the kind of low-band spectrum most needed by Sprint.