Clearwire investor wants spectrum sale to anyone but Sprint

[Deval]

So here is a question, what would happen if Sprint were to pull their share of the spectrum out of Clearwire? Maybe even buy it back at a premium? In theory it could be redeployed on our NV towers, and used that way for capacity.

[Rawvega]

Mount Kellet gets some backup from Crest Financial: http://www.bloomberg.com/article/2012-11-07/aaCd1AKKQFE8.html

 

Mr. Jonathan Fiorello

Chief Operating Officer

Mount Kellett Capital Management LLP

623 Fifth Avenue

18 Floor

New York, New York 10022

 

Dear Mr. Fiorello:

 

Crest Financial Limited ("Crest"), a Houston-based investment company, is a

long-term investor in Clearwire Corporation (the "Company"). Crest, with its

affiliates, currently owns 45,756,898 Class A shares of the Company, or

approximately 6.62 percent of the Company's outstanding Class A stock.

 

We have read the November 1, 2012 letter that you sent to the Company. Crest

also has been monitoring the recent developments associated with the Plan of

Merger and Agreement ("Merger Agreement") between Sprint Nextel Corporation

("Sprint"), the Company's dominant shareholder, and Softbank Corporation

("Softbank"). It appears that the Softbank-Sprint merger may not be in the

Company's best interest and may threaten the interests of the Company's

minority shareholders. Your letter expressed many of the concerns we have in

this regard, and we commend you for sending it.

 

By way of background, Crest and its affiliates have a long history of

investing in the spectrum that Clearwire currently holds. In 1996, the FCC

awarded to Digital & Wireless, a Crest affiliate, licenses providing rights to

frequencies in 19 markets in a BTA auction. In June of 2004, Clearwire

Corporation, then still a privately-held corporation, acquired these licenses

from Digital & Wireless. As part of the consideration for this sale, Crest

received a significant number of Clearwire Corporation shares. Since that

sale, Crest and its affiliates have continued to purchase shares in Clearwire,

thus evidencing our belief in the value of Clearwire's assets and, just as

important, Clearwire's business plan for monetizing these assets.

 

Unfortunately, the Company finds itself with insufficient capital to build out

its facilities to realize the full value of the spectrum capacity that it

holds. Like you, Crest would expect that, if the members of the Company's

Board were intent on discharging their fiduciary duties, they would take

immediate action to bolster the Company's liquidity.

 

In addition to the sale of excess spectrum that you proposed in your letter,

Crest believes that immediate steps to raise capital through the offering and

sale of additional common shares would be among the steps a board of

directors, acting in the best interests of all shareholders, would pursue.

Proceeds from such an offering, together with proceeds from the sale of a

portion of the Company's excess spectrum to a third party or parties, would

ensure a successful build-out of the Company's network and bolster the

Company's position as it renegotiates the lease of its spectrum to Sprint. And

the additional and immediate network investment facilitated by a successful

share offering would likely increase the value of Clearwire's assets and thus

the sale price for any excess spectrum.

 

It is Crest's view that this sale of additional shares can be done quickly and

successfully for the good of the Company, its shareholders and the public at

large. Indeed, Crest would consider participating in such an offering.

 

There are a number of reasons why a public offering and sale of shares, in

addition to the sale of its excess spectrum, should be pursued. First, the

value of the Company's assets, which the Softbank-Sprint proposal and the

Company's own disclosures confirm, would easily support such an offering.

Second, the proceeds from the sale of shares would provide the Company with

the capital necessary to push ahead with its build-out strategy during the

period it is working to complete its sale of excess spectrum. Third, raising

capital from investors other than the dominant shareholder, or at least pro

rata with it, would prevent what has amounted to a creeping tender offer that

Sprint has said is its intention with regard to the Company – to wit, the

buying of shares of strategic investors whenever it gets a chance. Finally,

the Company has recently experienced success in raising capital, specifically

through sales of its common shares to the public utilizing its Sales Agreement

with Cantor Fitzgerald & Company. There is no reason why these efforts should

not continue. Indeed, it is unclear why the Company abruptly ended that

arrangement near the end of July notwithstanding the success CF&Co.

experienced in selling the Company's common shares under that arrangement.

 

Crest also is concerned that recent actions (or inactions) of the Company's

Board may not be in the best interests of either the Company or its minority

shareholders. Like you, we also expect that the members of the Company's Board

will continue to perform the fiduciary duties that each owes to the Company

and its shareholders. Crest is concerned that Softbank and Sprint are

positioning themselves to obtain the exclusive benefit from the Company's

valuable spectrum and assets through the Merger Agreement at the expense and

to the detriment of the Company and its minority shareholders. While Sprint

acquired enough shares to further cement its control of the Company (50.8%)

just days after the Merger Agreement was announced, Sprint and Softbank have

stated publicly that their transaction "does not require Sprint to take any

actions involving Clearwire other than those set forth in agreements Sprint

has previously entered into with Clearwire and certain of its shareholders."

Odder still is the value placed on the shares purchased by Sprint in that

transaction: $2.00 per share of Class A stock and $13.98 per share of Class B

stock. The Class A shares were valued at their original price. But the Class B

shares received a significant premium; Class B shares were issued at $7.33 per

share. We think this higher valuation for the Class B shares is intended to

unfairly benefit Class B shareholders and at the expense of Class A

shareholders, including Crest and you.

 

In light of this, Crest believes that compliance with its fiduciary duties

under these circumstances would require a properly functioning Board to take a

variety of actions to mitigate the danger of Sprint improperly using its

status as the controlling shareholder to oppress the rights and economic

position of minority shareholders. For example, it could assess the impact on

the Company and its public shareholders of the Softbank-Sprint merger as well

as subsequent events and public statements, review all other dealings with

Sprint, and establish defensive measures to enhance the ability of independent

directors to ensure full value for minority shareholders. One area of inquiry

could be the Equity holders Agreement of 2008 and, specifically, the

standstill agreement that prohibits Sprint from "any direct or indirect

acquisition of any Common Stock." The standstill agreement contains an

exception to protect minority shareholders—namely, that Sprint can only make

an offer for 100 percent of the Company's shares, and only if the offer is

approved by independent, unaffiliated members of the Company's Board and by a

majority of minority voting shares.

 

Any or all of these steps would strengthen the Board's ability to prevent any

future offer by Sprint to purchase the Company or its assets at a distressed

or undervalued price.

 

From day one, Crest has seen its investment in the Company as a way to

facilitate the completion of a world-class network that could challenge the

extant duopoly in the wireless communications industry, bring real competition

and innovation to the marketplace, and benefit consumers of mobile

telecommunications. These goals, which we are sure will be the focus of the

Federal Communications Commission's approval process, can be achieved only if

the Company's spectrum and assets are managed for the benefit of all

stakeholders and not just for shareholders with temporary or untoward

advantage and dominance.

 

We believe that, properly managed, the Softbank-Sprint merger proposal

presents an opportunity to benefit not only the interests of all shareholders,

but also the public interest. Improperly managed, the merger could harm

minority shareholders and the public at large. Crest will continue to monitor

the Company's progress and is eager to engage the Company on any relevant

matters.

 

Thank you.

 

Sincerely yours,

 

/s/ David K. Schumacher

David K. Schumacher

General Counsel

Crest Financial Limited

 

 

[S4GRU]

Every minor shareholder is at risk for what the major shareholders do. That's how investing works. In all of my investments, I am a minor shareholder. I am impacted by major shareholder decisions all the time. This is rediculous. But they all benefit from Sprint's investments in Clearwire, Sprint's customer status in Clearwire, Sprint making debt payments for Clearwire and they profit off of Sprint taking over Clearwire.

 

Sprint has saved Clearwire from bankruptcy several times. And now Sprint will likely over pay shareholders for Clearwire. These are some greedy wrong minded SOB's.

 

Many investors planned on Clearwire to fail and then profit off the asset sales. I guess they targeted Clearwire spectrum to be worth more than it is. A spectrum sale would be worth much less than what Sprint/SoftBank will pay. Idiots.

 

Robert via Samsung Note II using Forum Runner

[bigsnake49]

There is no market for Clearwire's spectrum. They have tried and failed to attract any interest. AT&T has WCS spectrum and will also benefit from 700MHz B band sales from Verizon. Verizon has scores of AWS spectrum. T-Mobile and Metro also have no need for spectrum. Sprint, through PCS spectrum purchases like the one with USCC and possibly TMobile/Metro, is trying to strengthen their PCS spectrum position, will bid for PCS H, and has SMR for propagation. Clearwire's spectrum is extremely ancillary to Sprint and might be hurting their efforts to acquire lower frequency spectrum. Clearwire's spectrum might be of interest to Dish and Direct TV for an VOD and OTT play. I have yet to see a business case for a conventional nationwide cellular network on their spectrum. I don't know what these guys are smoking, but whatever it is, it's good stuff.