Today, Sprint announced that it would be spending $2.2bn to acquire the remaining (roughly) half of Clearwire that it doesn't already own. The transaction, which is naturally subject to regulatory approval, will give the carrier ownership of all of Clearwire's significant share of spectrum, which will be a huge boost to Sprint as it attempts to build out an LTE network to compete with Verizon and AT&T.
Of course, these deals can take forever to close, so in the meantime, the two companies have entered into a rather brilliant agreement: Sprint has promised to buy roughly $80m worth of Clearwire stock every month starting in January 2013 for up to ten months (or a total of $800m, and slightly more than 1/3rd of the total Clearwire purchase price). This bit of funding is subject to all manner of conditions, though. Check the text:
In connection with the transaction, Clearwire and Sprint have entered into agreements that provide up to $800 million of additional financing for Clearwire in the form of exchangeable notes, which will be exchangeable under certain conditions for Clearwire common stock at $1.50 per share, subject to adjustment under certain conditions. Under the financing agreements, Sprint has agreed to purchase $80 million of exchangeable notes per month for up to ten months beginning in January, 2013, with some of the monthly purchases subject to certain funding conditions, including conditions relating to the approval of the proposed merger by Clearwire’s shareholders and a network build out plan.
So, you're saying there are conditions attached? Cool. Glad we've cleared that up. It's important to note, though, because what Sprint wants to do here is bring an influx of funding in for Clearwire before the acquisition goes through so that the latter can build out its LTE network without sitting around, waiting for the feds to give the greenlight. Assuming the deal is approved, there will be nearly a year worth of build out waiting for Sprint, on top of Clearwire's existing infrastructure.
What will happen if the deal doesn't go through isn't exactly clear, and we imagine that's why all these "certain conditions" are hanging out in the announcement, but suffice to say it's a pretty bold move. It seems that Softbank's acquisition of Sprint has made the carrier much more ambitious and, with some luck, we might actually see the Now Network start to hold its own in another year or two.
The US carrier market could certainly use a strong third player.