Clearwire investor steps up campaign against Sprint deal

Fri Jan 4, 2013 2:48pm EST

* Crest Financial to take fight against Sprint deal to FCC

* Crest to argue Sprint deal bad for U.S. taxpayers

* Kansas court says Sprint must face lawsuit by its investors

By Tom Hals

Jan 4 (Reuters) - A large Clearwire Corp shareholder said on Friday it plans to ask the U.S. telecoms regulator to block the sale of the wireless service provider to its majority owner, Sprint Nextel Corp, stepping up the investor's campaign against the deal.

Crest Financial's general counsel also said on a call with reporters that it also plans to ask the U.S. Federal Communications Commission to block Sprint's plan to sell 70 percent of itself to Softbank Corp of Japan for $20 billion.

Going to the FCC is a new line of attack on the Sprint deal by Crest, which has also filed a class action lawsuit on behalf of Clearwire investors. Dave Schumacher, Crest's general counsel, said on Friday the fund said other minority investors told Crest they did not support the Sprint deal, but he did not provide details.

The investment fund, which owns around 8 percent of Clearwire, has said Sprint's offer of $2.97 share for the roughly 50 percent of Clearwire it does not currently own, "grossly undervalues Clearwire." Sprint's offer is worth about $2.2 billion, but Schumacher said Crest had not done its own valuation and was basing its criticism of the price on estimates by analysts.

In going to the FCC, Crest will argue that the Clearwire deal artificially undervalues the company's spectrum holdings, Schumacher said. That in turn potentially devalues future revenue for the U.S. government when it auctions off spectrum licenses.

"The merger is therefore a bad deal all around for Clearwire shareholders and also for the public at large," said Schumacher.

A spokesman for Clearwire, Mike DiGioia, declined to comment on Crest's intention to go to the FCC. He said a special committee of the board conducted a rigorous evaluation of the company's options before agreeing to the Sprint deal.

Clearwire's chief executive, Erik Prusch, has said the company does not have attractive alternatives as it seeks funding to continue to upgrade its own network and could risk bankruptcy if the Sprint deal does not succeed.

Crest has sued Clearwire in the Court of Chancery in Delaware, where the company is incorporated, to permanently block the deal.

The Delaware court will hear arguments next week on Crest's request to expedite the case and Schumacher said Crest hopes to move to a trial in April.

The deal will need approval by a majority of Clearwire's minority shareholders and Sprint has said it has the support of three large Clearwire investors - Comcast Corp, Intel Corp and Bright House Networks LLC - which hold 13 percent of Clearwire stock. Schumacher said the fund would try to prevent the three from voting because of their affiliation with Sprint.

As Clearwire's fight with its shareholders heats up, Sprint has its own shareholders to contend with.

A Kansas court on Friday declined Sprint's request for an early dismissal of a lawsuit by a union pension fund that holds Sprint stock.

The lawsuit alleged that Sprint's chief executive, Daniel Hesse, rushed merger talks with Softbank and did not get a fair price.

The ruling by Thomas Sutherland, the judge for the District Court of Johnson County, Kansas, will allow the pension fund to begin to demand documents and witnesses as it tries to prove its case.

Sprint spokesman Scott Sloat did not immediately respond to a request for comment.

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