“Any time there’s an opportunity at the right price to take out a strategic investor, we will,” Hesse, 59, said yesterday in a joint interview with Softbank Corp. (9984) President Masayoshi Son at Bloomberg’s New York headquarters. Softbank agreed to buy 70 percent of Sprint this week for about $20 billion.
Clearwire’s corporate investors include Intel Corp. (INTC:US), Comcast Corp. (CMCSA:US) and Time Warner Cable Inc. (TWC:US) Sprint is already acquiring a Clearwire stake from telecommunications pioneer Craig McCaw to gain a majority stake in the carrier. Hesse, who will stay on as Sprint’s CEO following the Softbank investment, said he doesn’t need 100 percent of Clearwire because Sprint’s current partnerships give it access to the spectrum it needs until 2014.
“We just never made an offer to buy all of Clearwire, that’s just not on the table,” Hesse said. “We don’t need to do anything, we have a commercial arrangement with Clearwire, we have a contract and they provide us with WiMax 4G service and they are beginning to build out LTE 4G services.”
So-called fourth-generation networks are being developed to offer higher speeds to smartphone customers. Overland Park, Kansas-based Sprint dropped 2.2 percent to $5.65 at the close today in New York, while Bellevue, Washington-based Clearwire dropped 8.9 percent to $1.85.
Sprint will pay Eagle River Holdings LLC, the investment firm owned by McCaw, about $100 million for 30.9 million of Clearwire’s Class A shares, or 4.5 percent of the total, and 2.73 million of its Class B stock, according to a regulatory filing yesterday. The purchase brings Sprint’s ownership (CLWR:US) to a little more than 50 percent from 48 percent.
The move improves Clearwire’s corporate governance because Eagle River’s board seat goes to the company, increasing the number of independent members to three from two, Hesse said. Sprint will keep the right to appoint seven out of Clearwire’s 13 board members. One of Sprint’s appointees is independent.
Clearwire’s other corporate investors have lost their interest in the company, Hesse said.
“The cable companies were thinking of a mobile strategy, times have changed they don’t have an interest in that anymore. Intel was interested in putting WiMax 4G chips in all sorts of devices, they don’t have that interest anymore. We are really the only strategic investor.”
If Sprint were to buy additional stakes in Clearwire, those board seats also would revert back to the company, increasing the independence of Clearwire’s board as designed by the original corporate governance rules, Hesse said.
For the future of Clearwire “we want government structure that is aligned for what is best for the public and for Sprint.”
Thanks to those rules, which are laid out in a Dec. 8, 2008, corporate filing, Sprint doesn’t gain operational control of Clearwire even if it gains a majority stake, Hesse said.
That way it doesn’t need to consolidate Clearwire’s debt on its balance sheet. Sprint has more than $4 billion of debt coming due next year, while Clearwire has $2.9 billion of debt coming due in 2015, according to data compiled by Bloomberg.
“We don’t have to consolidate it,” Hesse said. “We don’t want to consolidate it.”
For the future, Hesse and Son didn’t rule out any acquisitions and declined to elaborate on their strategy.
“Anything you can think of, I have thought about, don’t rule out anything,” Son said. “If I didn’t have an interesting strategy, I wouldn’t bet $20 billion” on Sprint.
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