Sprint Takeover Drama Is Far From Over

NEW YORK ( TheStreet) -- As a crucial shareholder vote on Sprint's ( S) proposed $20.1 billion takeover by SoftBank of Japan approaches, the merger efforts of the nation's third leading wireless carrier are far from over.

In fact, even though the biggest piece of a wireless industry realignment may be all but settled in just over a week's time, investors and consumers might be wise to view consolidation as only half complete.

Two shareholder votes on wireless mergers take place next week, with many parties including vocal hedge funds, competing bidders, special committees reviewing transactions and proxy advisory firms all poised to make headline grabbing decisions.

A chain reaction to the pending takeovers of Sprint and Clearwire ( CLWR) is yet to happen, which will keep Wall Street humming in the coming week. A busy Wall Street, however, may undercut the interests of the ordinary wireless consumer.

Sprint is fighting with satellite TV provider Dish Network ( DISH) for full control of Clearwire ( CLWR), a fledgling broadband service it helped to create and which holds valuable spectrum for wireless carriers.

Meanwhile, Sprint continues to recommend its shareholders accept SoftBank's acquisition of the company, as a special committee appointed by the company's board of directors weighs an alternative takeover proposal by Dish Network.

Dish is conducting due diligence on a $25.5 billion proposal to buy Sprint and create a 'triple play' offering of wireless, broadband and television. Still, the company has yet to submit a formal, fully-financed offer to Sprint.

Sprint's shareholder meeting on the SoftBank merger is slated for June 12.

Clearwire's shareholder meeting on Sprint's offer to buy the company's remaining stock at $3.40 a share is scheduled for June 13, after a $4.40 a share tender offer by Dish Network in late May delayed the meeting. Sprint already has majority control of Clearwire, but the offer for full control is a crucial element to the carrier's strategy to bolster its wireless service.

Status Quo

As it currently stands, Sprint's special committee of directors is likely waiting for a formal offer from Dish before it makes a recommendation on which transaction to support.

Paulson & Co. and Omega Advisors, two large hedge fund shareholders in Sprint shares, have indicated they see Dish's proposal as superior to SoftBank's, however, they have yet to make formal statements supporting one transaction over the other.

Both hedge funds appear to await a response to Dish's proposal from SoftBank and likely expect a price boost by the Japanese telecom. For its part, SoftBank has shown no interest in budging from a fully financed offer made in October until Sprint's special committee makes its formal recommendation. SoftBank, after all, continues to have support from Sprint's board of directors on its takeover and recapitalization of the telecom.

Finally, Sprint's special committee isn't likely to make any endorsements until it receives a formal offer from Dish.

Institutional Shareholder Services, a top shareholder proxy advisor, has recommended shareholders vote in favor of SoftBank's deal for Sprint. ISS, however, hasn't evaluated Dish's competing proposal.

Glass Lewis, a competitor proxy advisor, meanwhile, recommends shareholders abstain from the scheduled June 12 vote given Dish's potentially superior offer.

Bloomberg News reported on Tuesday Sprint was considering delaying its shareholder vote, however, the company appeared to object to such statements.

"We have scheduled the meeting for June 12th and have made no announcement otherwise," Sprint spokesperson Scott Sloat said in an e-mailed statement Tuesday.

But wait. There's More behind Door Number Two

Sprint's proposed takeover of Clearwire may follow a similar cycle of news and decisions with about a week left until a crucial shareholder vote.

Clearwire's largest remaining investors, including Crest Financial and Mount Kellett Management, do not support Sprint's $3.30 a share offer for the company's remaining shares.

Meanwhile, Sprint and Dish Network are engaged in a legal back-and-forth on whether a $4.40 a share competing offer is even valid.

Currently, Sprint and Dish are arguing over whether a prospective minority holder can have the influence to reconstitute Clearwire's board given Sprint's majority control and agreements put in place for equity holders when the company was created.

Dish's tender offer is "not actionable" because it assumes certain governance changes that are not possible given Clearwire's agreement with its initial equity holders, Sprint said earlier in June.

"It defies logic that Sprint could credibly assert that it is illegal for Clearwire to agree to customary minority protection rights in favor of a significant stockholder such as DISH will be (by definition holding in excess of 25% of the Clearwire shares) while claiming that a 6% stockholder such as Comcast is entitled to block minority stockholders from accepting DISH's superior offer," Dish retorted in a press release Wednesday.

John Hodulik, a telecom analyst at UBS, has pointed out that although Dish's offer is higher than Sprint's, it depends on a change in Clearwire's governance structure under its equity holder agreement. "It remains unclear whether Clearwire would be able to grant such rights without Sprint's agreement," Hodulik wrote in a late May client note.

Clearwire was formed in 2008 through its merger with Sprint's 2.5 GHz spectrum assets and $3.2 billion in investor capital provided by Sprint, Comcast ( CMSA) and Intel ( INTC), among others.

The company's board currently recommends shareholders support Sprint's takeover, however, a special committee has yet to comment on Dish's tender offer.

"Our Board and Special Committee are continuing their independent review of DISH Network's offer to determine the best course of action for the Company and all of its stockholders," Susan Johnston, a Clearwire spokesperson said in an e-mailed statement June 3.

"The Special Committee has not made any determination to change its recommendation of the current Sprint transaction, and we will have no further comment until they have finished their full review."

Proxy advisor ISS supports Sprint's $3.40 a share offer for Clearwire's remaining shares, while Glass Lewis recommends shareholders vote against the deal.

Clearwire says Glass Lewis' recommendation suffered from "superficial analysis, contained numerous inaccuracies, and grossly underestimates the economic realities facing the Company."

Wall Street Horse Races Pit Speculators against Consumers

A handful of influential parties are poised to make their voices heard in Sprint's takeover of Clearwire and SoftBank's offer to buy Sprint with just a week left until crucial shareholder votes.

Expect a frenzy of headlines and activity on Wall Street.

Dish needs to firm up billions in financing for its debt-laden proposal to buy Sprint. Sprint and SoftBank, meanwhile, may need to have bankers on speed dial given the prospect of rising takeover prices. Investors who speculated in Sprint and Clearwire shares when both companies were priced for failure aren't likely quit on some of the canniest merger arbitrage bets in recent years.

Influential proxy advisors, who are in the business of making clear recommendations to shareholders, unlikely to agree on the Clearwire and Sprint transactions.

What spectacle, and what a horse race.

Unfortunately for wireless consumers, who are probably only interested in industry consolidation for the prospect that also-rans such as Sprint and T-Mobile ( TMUS) come out of the process better equipped to provide a reliable, low-cost alternative to premium-priced plans offered by AT&T ( T) and Verizon ( VZ), a frenzied conclusion could leave the industry with more debt, less cash and worse off.

Sprint and Clearwire's special committees have to answer to Dish's late entrance as an aggressor in the wireless industry and provide a clear basis to investors for Sprint and SoftBank's merger efforts or those of Dish.

While shareholders are certain to get their representation, hopefully interested parties also take account the best outcome for consumers.

One possibility is Dish uses its agitation of wireless consolidation as a means to negotiate a network sharing agreement with Sprint that could leave all parties better off. A network sharing agreement would also snuff out the bidding war that some on Wall Street are pulling for.

A hosting agreement with Sprint would allow Dish to build out its wireless ambition and create a credible new service bundle in the market to challenge AT&T and Verizon, according to Wells Fargo analyst Jennifer Fritzsche. Sprint, meanwhile, would get an additional revenue stream similar to a 15-year deal it negotiated with now-defunct wireless service LightSquared, which would have paid the carrier $9 billion for access to its network.

While Dish's proposals for Clearwire and Sprint would be seen as brinksmanship in such an outcome, it could leave all parties better off financially and the industry more competitive.

Sprint's takeover is the crucial element to a wireless industry reconfiguration that's poised to be one of the biggest consumer stories of this decade.

-- Written by Antoine Gara in New York

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