Sprint will not Buyout Clearwire, Sending Shares Plummeting


Following merger talks between Sprint Nextel Corporation (NYSE:S) and Japanese firm Softbank Corp (PINK:SFTBF) (TYO:9984), Clearwire’s shares have embarked on a bullish stretch. The improved outlook on Clearwire Corporation (NASDAQ:CLWR) was fuelled by increased speculation that Sprint would purchase the remaining stake at Clearwire if the Softbank merger talks bore fruits. Now that Sprint has agreed to sell a 70 percent stake to Softbank for $20.1 billion, Clearwire seems to be holding on to the short end of the stick after two well placed sources within Sprint revealed that Sprint had no immediate plans of taking over Clearwire.

Sprint will not Buyout Clearwire, Sending Shares Plummeting

The sources, who remained anonymous, further pointed out that Softbank and Sprint’s current top priority was to first close the merger deal, a process they revealed would take around six to eight months.  In addition to this, the two sources also noted that Sprint Nextel Corporation (NYSE:S) was unlikely to push forward with a takeover because it already owns its own spectrum. This particularly echoed the insights of Robert Chapman, the founder of Chapman Capital LLC. The hedge fund founder gave similar reasons to justify Sprint’s reluctance to takeover Clearwire at the moment. “Sprint doesn’t need to own Clearwire Corporation (NASDAQ:CLWR) now, as they already paid $900 million to lease the spectrum they need for 2012 and 2013,” remarked Chapman.

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Clearwire’s shares dipped close to 20 percent on Tuesday morning following these reports. Shares had nearly doubled since the merger announcement, before today’s reversal.

Sprint Nextel Corporation (NYSE:S), which holds a 48 percent stake at Clearwire Corporation (NASDAQ:CLWR) including an equal percentage of voting power, was unavailable for comment. Softbank President Masayoshi Son states. “I don’t talk about any specific detail of our strategy. I never do that in advance,” remarked Son in response to an analyst’s question on the same.

Sprint, Softbank deal opens up U.S market for Softbank

The deal will allow Softbank to make significant inroads into the U.S market, a market that is widely considered to have more room for growth in comparison to its home Japanese market.

Sprint’s stock was trading at $5.70 at the time of writing, up 0.35%.