Report: Sprint Deal Unlikely to Get Past Clearwire Shareholders

[bigsnake49]

Today perhaps.. 

 

In a few days when Dish comes back with $5.50 - 6, Clear's board will continue trying to string Sprint along while simultaneously trying to jump back in the sack with Charlie.   

 

The most Dish can get is 25% and they can't give them any special priviledges.

[marioc21]

The most Dish can get is 25% and they can't give them any special priviledges.

 

Don't forget the breakup fee if they turned their backs on the deal.  $115 million would be crippling to clearwire.  

[bobbi]

Don't forget the breakup fee if they turned their backs on the deal.  $115 million would be crippling to clearwire.  

 

Or that Mount Kellett and others have pledged to sell to Sprint even if deal doesn't close. They already had the the 13% from Comcast, Intel, Bright House.  This is 9% more. If the deal doesn't close, Sprint also converts the 3 months financing.

 

Clearwire also agreed to hold the annual shareholders meeting as "expeditiously as possible" if the deal doesn't close. And the standstill agreement waived under certain circumstances.

 

The whole deal is designed to block DISH.

[S4GRU]

The whole deal is designed to block DISH.

 

Ding, ding, ding!!!

 

Robert from Note 2 using Tapatalk 4 Beta

 

 

[marioc21]

 

 

 

Or that Mount Kellett and others have pledged to sell to Sprint even if deal doesn't close. They already had the the 13% from Comcast, Intel, Bright House.  This is 9% more. If the deal doesn't close, Sprint also converts the 3 months financing.

 

Clearwire also agreed to hold the annual shareholders meeting as "expeditiously as possible" if the deal doesn't close. And the standstill agreement waived under certain circumstances.

 

The whole deal is designed to block DISH.

 

 

Ding, ding, ding!!!

 

Robert from Note 2 using Tapatalk 4 Beta

 

Does seem like Sprint went through closing one door after another when it worked out this deal with Clearwire.  Not many options left for Dish.  How long before Dish files its own lawsuit against the new deal?

[S4GRU]

How long before Dish files its own lawsuit against the new deal?

 

I'm trying to imagine on what grounds.  Sprint always had the better hand as a majority shareholder, and the pool of minority shareholders for DISH kept shrinking.  Now the pool is too small.  All a lawsuit would do is delay, I don't think it has any chance of going his way.  It would waste time and money for DISH, which would be wasted if they have a Plan B...like T-Mobile.  I guess we will know shortly if Charlie has a plan that does not involve Sprint or Clearwire.

 

Robert

[digiblur]

Dish has wasted tons of money on lawsuits in the past. That's one of their strongest qualities, they should take that energy/funds and put it towards product development and get rid of that poorly designed Hopper.

[bigsnake49]

I'm trying to imagine on what grounds.  Sprint always had the better hand as a majority shareholder, and the pool of minority shareholders for DISH kept shrinking.  Now the pool is too small.  All a lawsuit would do is delay, I don't think it has any chance of going his way.  It would waste time and money for DISH, which would be wasted if they have a Plan B...like T-Mobile.  I guess we will know shortly if Charlie has a plan that does not involve Sprint or Cle

 

They will probably go after T-Mobile. T-Mobile has a decent amount of spectrum for the number of customers they have. They (Dish) also own a lot of Lightsquared debt and could end up with the LSQ spectrum which they can then pair up with their own spectrum as has been explained by Tim Farrar and AJ in the past.

Edited June 21, 2013 by bigsnake49

[nebody00]

So in the aftermath, if the Sprint/Softbank/Clearwire merger/buyout goes through without a hitch what damage did Ergen do to the future finances of the new company?  I heard a lot of money that was supposed to go toward network improvements/expansions were instead given to the shareholders so does that hurt the New Sprint in the long run?  Can they still participate in the 600mhz auctions?

Edited June 21, 2013 by nebody00

[IamMrFamous07]

So in the aftermath, if the Sprint/Softbank/Clearwire merger/buyout goes through without a hitch what damage did Ergen do to the future finances of the new company? I heard a lot of money that was supposed to go toward network improvements/expansions were instead given to the shareholders so does that hurt the New Sprint in the long run? Can they still participate in the 600mhz auctions?

 

I heard sprint is getting less capital on this new deal but sprint will be saving 2billion a year with the SoftBank purchase plus sprint will soon make a profit from the iPhone and Nextel being shutdown so all of that will more than likely go to the network.

[ericdabbs]

I heard sprint is getting less capital on this new deal but sprint will be saving 2billion a year with the SoftBank purchase plus sprint will soon make a profit from the iPhone and Nextel being shutdown so all of that will more than likely go to the network.

 

That is true but losing 3 billion in new capital to spend on Network Vision is still significant because there are still a ton of things that Sprint needs to do to revamp the network.  With the delays in Network Vision LTE build out,  LTE-Advanced rollout coming up and needing to spend a lot new capital to deploy small cells within the next 2 years, the 3 billion would have come in handy. 

 

Its a shame that Softbank couldn't just decrease the new capital given to Sprint from 8 billion to 7 billion and then just front more money out of itself for the difference especially if they are going to get 8 percent more in equity from 70 to 78%.  But I guess Ergen was able to push Son's buttons and he knew he had to make a bold move in order to secure the deal.  At the end of the day, Softbank securing Sprint is what we all want and hopefully this vote next week will make it official.

[S4GRU]

SoftBank can lend as much money to the New Sprint as it wants to just by increasing its ownership share.  The minority shareholders cannot stop it.  However, it is unlikely SoftBank will go this route.

 

The New Sprint will be able to borrow money at more favorable terms than Sprint Nextel ever could in the past.  And with the ridding of the iDEN network cost burdens, the New Sprint balance sheets are going to look night and day better.  This increase of money to shareholders only affects mid term cash on hand for upgrades, not short term (1-2 years).  This will not slow down or change course any of SoftBanks's capex plans for the New Sprint.

 

Everything is still going forward as planned on the network side without any diversions or pit stops.  And the New Sprint will be sitting in a 100x better position for capex than Sprint continuing by itself or a DISH owned Sprint.  This is by far the best scenario of all.

 

Robert

[Boosted20V]

SoftBank can lend as much money to the New Sprint as it wants to just by increasing its ownership share.  The minority shareholders cannot stop it.  However, it is unlikely SoftBank will go this route.

 

The New Sprint will be able to borrow money at more favorable terms than Sprint Nextel ever could in the past.  And with the ridding of the iDEN network cost burdens, the New Sprint balance sheets are going to look night and day better.  This increase of money to shareholders only affects mid term cash on hand for upgrades, not short term (1-2 years).  This will not slow down or change course any of SoftBanks's capex plans for the New Sprint.

 

Everything is still going forward as planned on the network side without any diversions or pit stops.  And the New Sprint will be sitting in a 100x better position for capex than Sprint continuing by itself or a DISH owned Sprint.  This is by far the best scenario of all.

 

Robert

 

I agree. Just taking the OPEX that was spent maintaining the Nextel network and putting towards any CAPEX is a princely sum.

[Deval]

They will probably go after T-Mobile. T-Mobile has a decent amount of spectrum for the number of customers they have. They (Dish) also own a lot of Lightsquared debt and could end up with the LSQ spectrum which they can then pair up with their own spectrum as has been explained by Tim Farrar and AJ in the past.

 

I thought the LSQ spectrum was useless?

[bigsnake49]

SoftBank can lend as much money to the New Sprint as it wants to just by increasing its ownership share.  The minority shareholders cannot stop it.  However, it is unlikely SoftBank will go this route.

 

The New Sprint will be able to borrow money at more favorable terms than Sprint Nextel ever could in the past.  And with the ridding of the iDEN network cost burdens, the New Sprint balance sheets are going to look night and day better.  This increase of money to shareholders only affects mid term cash on hand for upgrades, not short term (1-2 years).  This will not slow down or change course any of SoftBanks's capex plans for the New Sprint.

 

Everything is still going forward as planned on the network side without any diversions or pit stops.  And the New Sprint will be sitting in a 100x better position for capex than Sprint continuing by itself or a DISH owned Sprint.  This is by far the best scenario of all.

 

Robert

 

Softbank will invest further money in Sprint. While there is going to be significant opex savings from the shutdown of the IDEN network, the true savings won't accumulate until the site leases expire.

[bigsnake49]

I thought the LSQ spectrum was useless?

 

Not completely.

 

 

"While it is possible that Ergen could use the $1.5B that DISH has raised to mount a counterbid to either Sprint’s takeover of Clearwire, or T-Mobile’s takeover of MetroPCS, others think he is contemplating use of the money for a potential H-block bid, in order to persuade Sprint to enter into a more attractive hosting agreement. However, there is a far more intriguing possibility, which could explain why Sound Point started buying up more LightSquared debt at precisely the time when Clearwire decided to go with Sprint instead of DISH’s offer. That is an attempt to buy up all of LightSquared’s first lien debt, followed by a battle to oust Falcone when LightSquared current exclusivity (to propose a plan for emergence from bankruptcy) expires at the end of January.

Then DISH could propose in mid January that the AWS-4 uplink spectrum is instead converted to downlink spectrum (in line with a suggestion made by the FCC back in March), and LightSquared’s uplink spectrum would be used to provide an alternative uplink.

That would be logical, because it will be years before LightSquared is able to use its L-band downlinks, and the 1675-80MHz band is unlikely to be given away to LightSquared for nothing (as opposed to being auctioned). It would also make the full 20MHz of AWS-4 uplink spectrum usable for downlinks, and make an H-block counterbid by DISH far more plausible, because the H-block downlink (1995-2000MHz) could be combined with the AWS-4 spectrum between 2000-2020MHz, putting Sprint under further pressure. The FCC might also like to see the risk of litigation with LightSquared being taken off the table, as well as the prospect of higher bids for the H-block, even if the end result was a further delay in deployment of the AWS-4 spectrum."

http://tmfassociates.com/blog/2012/12/27/plan-c-for-charlie/

Edited June 21, 2013 by bigsnake49

[Boosted20V]

Softbank will invest further money in Sprint. While there is going to be significant opex savings from the shutdown of the IDEN network, the true savings won't accumulate until the site leases expire.

 

I thought they had negotiated one-time termination charges to pay off the remainder of their leases. So they will swallow a large sunk cost upfront and then have no further charges tied to the network.

[bigsnake49]

I thought they had negotiated one-time termination charges to pay off the remainder of their leases. So they will swallow a large sunk cost upfront and then have no further charges tied to the network.

 

Did they? Can you point me to the quarterly or yearly reports that mention that.

[Boosted20V]

Did they? Can you point me to the quarterly or yearly reports that mention that.

 

From the 1Q 2013 conference call:

 

One part(note the lease exit charge part):

Similar to last year’s [pending] [ph] project when we shut down approximately 9600 Nextel sites, we are now evaluating the expenses related to the Nextel platform shutdown and expect to recognize the cost associated with lease exit charges, backhaul access contracts, as well as any other cost associated with the platform of between $500 million and $600 million in the second quarter related to payments beyond June 30, 2013, for which the company will not receive any economic benefit.

 

Second reference:

Regarding guidance for 2013, we expect 2013 consolidated adjusted OIBDA to be closer to the high end of our previous guidance of $5.2 billion to $5.5 billion, excluding any impact from our pending transactions. However, we do not expect to see the same seasonal trend as in recent years with this year having a sequential decline in the second quarter as previously discussed as well as less of a decline from third to fourth quarter as we begin to see some cost improvements partially offsetting the usually high selling costs of the fourth quarter. We expect CapEx to continue at around our current run rate for the remainder of the year. Also as Brad mentioned, we will have the charges associated with retirement of the Nextel platform leases and excess charges coming in the second quarter.

[bigsnake49]

From the 1Q 2013 conference call:

 

One part(note the lease exit charge part):

Similar to last year’s [pending] [ph] project when we shut down approximately 9600 Nextel sites, we are now evaluating the expenses related to the Nextel platform shutdown and expect to recognize the cost associated with lease exit charges, backhaul access contracts, as well as any other cost associated with the platform of between $500 million and $600 million in the second quarter related to payments beyond June 30, 2013, for which the company will not receive any economic benefit.

 

Second reference:

Regarding guidance for 2013, we expect 2013 consolidated adjusted OIBDA to be closer to the high end of our previous guidance of $5.2 billion to $5.5 billion, excluding any impact from our pending transactions. However, we do not expect to see the same seasonal trend as in recent years with this year having a sequential decline in the second quarter as previously discussed as well as less of a decline from third to fourth quarter as we begin to see some cost improvements partially offsetting the usually high selling costs of the fourth quarter. We expect CapEx to continue at around our current run rate for the remainder of the year. Also as Brad mentioned, we will have the charges associated with retirement of the Nextel platform leases and excess charges coming in the second quarter.

 

Thanks, that's really helpful.

[WiWavelength]

I thought the LSQ spectrum was useless?

 

No, not "useless."

 

First, LightSquared's spectrum consists of multiple satellite spectrum allocations in between 1500 MHz and 1700 MHz.  It is perfectly useful for continued satellite use.

 

Second, for terrestrial use, LightSquared configured its spectrum with an inverted duplex:  the downlink is lower in frequency than the uplink.  Additionally, for carrier aggregation, the downlink features two 10 MHz FDD carriers, while the uplink is limited to one 10 MHz FDD carrier.  For an illustration, see the Javad graph below:

 

 

As configured, the downlink is what swamps GPS; the uplink does not.  So, the uplink potentially could be repurposed with other spectrum, such as AWS-4.  For example, take the AWS-4 uplink (2000-2020 MHz), which is adjacent to and problematic with the PCS/AWS-2 H block downlink, then convert the AWS-4 uplink to downlink.  The H block problem goes away, and the AWS-4 uplink converted to downlink could be paired with the LightSquared uplink in a traditional duplex.  Moreover, the downlink carrier aggregation configuration would remain with two 10 MHz FDD downlink carriers and one 10 MHz FDD uplink carrier.

 

AJ

[Deval]

Thank you AJ for setting me straight.

 

That being said, unless you're Dish, who has AWS-4 (I believe), the spectrum as is, is problematic. 

[WiWavelength]

The customers that Dish are counting on for a triple play with fixed wireless are RURAL customers...

 

No, the above idea gets bandied about a lot, but I highly doubt its veracity.

 

Yes, DBS may be the only option for many rural customers.  However, that does not mean DirecTV and Dish have the majority of their customers in rural areas.  I do not have numbers at my disposal, so I would love to see someone prove me right or wrong.

 

My educated conjecture, though, is that most DBS subs still live in urban areas, and they simply choose DBS as an alternative to cable.  Thus, on a fixed wireless basis, a great many Dish subs could also be served by the existing or slightly expanded Clearwire network.

 

As for comparisons to existing or previous fixed wireless services, those are largely irrelevant.  They represent the past, not the future.  Take 100 MHz of BRS/EBS spectrum, deploy LTE Advanced with 4x4 or even 8x8 MIMO, and fixed wireless could give cable broadband a run for its speed and money.  Unless I am sorely lacking in my understanding of cable propagation, MIMO is not an option for cable.

 

Now, I will not speak to the chances of success for such an endeavor, but it certainly would be doable.  And that seems to be what Ergen has been thinking, too.

 

AJ

[bigsnake49]

Thank you AJ for setting me straight.

 

That being said, unless you're Dish, who has AWS-4 (I believe), the spectrum as is, is problematic. 

 

Yes.

[bigsnake49]

No, not "useless."

 

First, LightSquared's spectrum consists of multiple satellite spectrum allocations in between 1500 MHz and 1700 MHz.  It is perfectly useful for continued satellite use.

 

Second, for terrestrial use, LightSquared configured its spectrum with an inverted duplex:  the downlink is lower in frequency than the uplink.  Additionally, for carrier aggregation, the downlink features two 10 MHz FDD carriers, while the uplink is limited to one 10 MHz FDD carrier.  For an illustration, see the Javad graph below:

 

 

As configured, the downlink is what swamps GPS; the uplink does not.  So, the uplink potentially could be repurposed with other spectrum, such as AWS-4.  For example, take the AWS-4 uplink (2000-2020 MHz), which is adjacent to and problematic with the PCS/AWS-2 H block downlink, then convert the AWS-4 uplink to downlink.  The H block problem goes away, and the AWS-4 uplink converted to downlink could be paired with the LightSquared uplink in a traditional duplex.  Moreover, the downlink carrier aggregation configuration would remain with two 10 MHz FDD downlink carriers and one 10 MHz FDD uplink carrier.

 

AJ

 

I wonder if they will try to do that. It would definitely increase their spectrum. But I don't think that Dish wants to be a strictly mobile player. Even with this compicated spectrum repurposing they will only have 40Mhz of downlink and 10Mhz of uplink. Now, if they acquire T-Mobile they will definitely have quite a bit of spectrum, albeit scattered along 4 bands (I'm not even counting Echostar's 700Mhz spectrum). I wonder if they can then swap some PCS spectrum for AWS-1 spectrum.

Edited June 21, 2013 by bigsnake49