UPDATE 4-Clearwire says Dish bid still under consideration

Fri Feb 1, 2013 6:26pm EST

* In talks with Dish since mid-2011-filing
    * Has not drawn on Sprint financing for February
    * Clearwire is likely aiming for Feb 28 resolution of Dish
offer review-analyst
    * Clearwire shares up 1.3 percent


    By Sinead Carew
    NEW YORK, Feb 1 (Reuters) - Clearwire Corp said on
Friday that it was still evaluating a takeover bid from
satellite television provider Dish Network Corp even
though it continues to recommend the Sprint Nextel Corp 
offer it had accepted in December.
    Minority shareholders of wireless service provider
Clearwire, which is majority owned by Sprint, have been hoping
to fetch a higher price for their shares since Dish announced a 
non-binding counter bid of $3.30 per share in January. 
    The Sprint deal, which requires approval from minority
holders, values Clearwire at $2.97 per share. While Dish would
be unable to buy Clearwire without Sprint's approval, analysts
say that it could potentially force Sprint to sweeten its bid.
    Clearwire's proxy statement, filed with regulators on
Friday, revealed that Clearwire board member John Stanton was
pushing for higher offers from both Sprint and Dish in the days
ahead of the Sprint agreement. Clearwire said Stanton had pushed
Sprint for an offer of $3.15 per share but to no avail.
    Clearwire, whose biggest customer is also Sprint, said in a
separate statement that it would continue negotiations with Dish
and Sprint and had passed on financing from Sprint for a second
time due to the Dish offer. It set a Feb. 28 deadline for
network upgrade talks with Sprint, which at least one analyst
sees as a potential deadline for the Dish review.    
    Dish's offer had required Clearwire to refrain from tapping
Sprint financing that was part of their buyout agreement and
some of the financing Sprint offered requires a commitment from
Clearwire to speed up an upgrade of its wireless network. 
    Sprint described the Dish offer as "illusory" because it has
so many conditions, some of which would go against Clearwire's
existing commercial agreement with Sprint.  
    But Clearwire's decline of $160 million of financing from
Sprint so far suggests that it sees potential for a firm Dish
deal or at least a higher offer from Sprint, analysts said.
    "If the Dish offer was as 'illusory' as Sprint claims or
Dish was not making a good effort to work out a transaction that
Clearwire's special committee could recommend, it's likely
Clearwire would have taken down this cash," said BTIG analyst
Walter Piecyk. 
    D.A. Davidson analyst Donna Jaegers, who personally owns
Clearwire shares, said that it could possibly negotiate a
spectrum sale with Dish, giving it some more badly-needed
funding and "more breathing room and time to bargain with
Sprint" for a higher offer.
    But several analysts were skeptical about Dish's plans. 
    "If they were really interested in acquiring the company, it
would have been in Dish's interest to present a more definitive
offer by the time Clearwire filed its proxy," said Shing Yin of
Guggenheim Partners. "If I were a shareholder, I would still
feel somewhat uncertain about Dish's true intentions."
    
    DISH WIRELESS AMBITIONS
    Dish, which is controlled by high profile billionaire
Charlie Ergen, has been looking to diversify beyond its core
pay-TV business, which has matured and faces tough competition
from cable, telecom and Internet video providers. Ergen has paid
more than $3 billion to buy wireless assets since 2011.
    Brean Capital analyst Todd Mitchell said he doesn't think
Dish "has the wherewithal" to acquire all of Clearwire.
    Dish declined to comment on Friday.
    Clearwire said in its proxy statement that it has been in
negotiations with a number of companies, including Sprint, as
far back as 2010 and Dish since mid-2011. Clearwire has been
seeking financing to avoid bankruptcy and to fund its efforts to
build a high-speed wireless network.
    Clearwire, which has said it has enough funding until the
third quarter, said in the proxy that it does not expect to
generate positive free cash flow until 2018. If it signs up
other wholesale customers besides Sprint it might get to
positive free cash flow by 2016, it said.
    For its part, Sprint said in December that it would buy $80
million of convertible Clearwire notes per month for up to 10
months as part of its buyout proposal.
    Clearwire, which already declined Sprint financing in
January because of the Dish review, said it decided against
drawing on the financing for February for the same reason. t
said it had not yet decided whether it will draw on the Sprint
funds in the coming months. 
    Under the current agreement Sprint is only required to give
Clearwire the last three months' financing if they can reach an
agreement on a timeframe for Clearwire to speed up its network
upgrade plans. 
    They were unable to reach an agreement on the upgrade
commitment by a Jan 31 cut off date so they have now extended
the deadline to Feb. 28, Clearwire said.
    "They're drawing a line in the sand on how long they can
continue to negotiate with Dish," Jaegers said.   
    Sprint needs approval from a majority of Clearwire's
minority shareholders for its proposed deal. 
    While Sprint said in December that it had support from
shareholders including Comcast Corp and Intel Corp
, owners of about 29 percent of the minority shares have
told Reuters that they are not happy with the offer price. 
    Some big minority holders such as Crest Financial and Mount
Kellett have spoken publicly about their objections to Sprint's
offer and Clearwire's acceptance of the offer. Crest sued to
stop the deal, and Mount Kellett said the Sprint offer price was
"grossly inadequate."
    However, after the detailed proxy statement, Jaegers said
that Clearwire's special committee,  appeared to have explored
every possible option. The committee includes independent
directors Dennis Hersch, Theodore Schell, John Stanton, Bruce
Chatterley and Mufit Cinali, according to the proxy.   
    In its proxy statement Clearwire said it had talks with as
many as eight potential partners since 2010 in addition to
Sprint, Dish and three private equity companies that ultimately
decided not to pursue a deal.  
    This included talks "throughout the summer of 2011" about
the possible sale of spectrum to a U.S. based provider of
Internet products and services that Clearwire did not name.
    In the summer and fall of 2012, Clearwire said it also held
preliminary discussions with a manufacturer of wireless
technology and a semiconductor company, which it referred to as
"Party I" about a possible spectrum sale and other alternatives
such as a network hosting arrangement.
    While Clearwire recommended in its proxy statement that
shareholders should vote in favor of the Sprint deal, the
company, which had a deadline to make the filing, made it clear
that it had not made its final decision about Dish.
    Sprint said it was pleased Clearwire recommended its deal.
    "We continue to believe that the DISH proposal is illusory
and conditioned on many things, including the receipt of
governance rights, a spectrum sale and a commercial agreement
which are not actionable under our merger agreement and other
agreements between Clearwire and Sprint," Sprint said.
    Clearwire shares closed up 1.0 cent at $3.19 on Nasdaq.
Sprint shares closed up 6 cents or 1.0 percent at $5.69 on New
York Stock Exchange. Dish shares ended the day 1 percent higher
at $37.68.