I’ve been puzzling over what Dish’s endgame here is with its surprise competing bid for Clearwire (NASDAQ:CLWR, news, filings), and I think the murky waters are starting to clarify, if by no other means than the process of elimination.
A Dish acquisition of Clearwire might be feasible in theory, but they must know they can’t win this auction unless Sprint wants them to win. After all, Sprint owns more than half of the voting shares, and even if they withdrew their bid they could still torpedo that of Dish and just fund them a while longer.
And a Dish acquisition of mere spectrum from Clearwire doesn’t add up either. To put it simply, it would leave Dish with yet more of what it already has (raw spectrum) and none of what it would need to enter the business (like, a network). So they’re going to spend a few billion for extra spectrum *before* they have even put their own holdings to work?
Some have even suggested that they’re looking to get merged into the whole, but bringing Dish’s spectrum and that of Sprint/Clearwire under a single umbrella also looks a bit unwieldy, as the added spectrum would just make the others scream louder about too much of it in a single pair of hands and gain even tougher regulatory scrutiny. Quite simply, Sprint and Clearwire have enough between them and adding Dish wouldn’t improve anything.
Unless of course you don’t actually merge them. I think that what Dish wants is for Clearwire to remain an independent wholesale force, with them owning a piece of it in partnership with Softbank/Sprint, selling capacity to their owners and probably also to others. There are some points in favor of such a conclusion to this soap opera.
Softbank faces some regulatory scrutiny in taking out both Sprint and Clearwire, with the early flash points being too much spectrum in one basket and the fact that it’s a foreign basket. So why not dilute both problems through a partial, 50% stake for Dish? The spectrum holdings then remain distinct, and the specter of foreign control is substantially lessened.
The two companies could then jointly fund the buildout of the LTE network, giving Clearwire a way forward that is easier on Sprint’s books. Both companies could then use Clearwire’s vast potential data capacity to supplement their own networks. Dish would presumably build out a network using its own spectrum of course – but without needing to hit everywhere at once since it has Clearwire’s to back it up.
But it’s going to be hard to reach such a deal. Softbank understandably wants it all under their thumb in order to have full control over the transformation it is planning. And Sprint’s had enough of this dual 4G personality thing by now, I should think. If those two can still pull the deal as is, they’re sure to do so. But what Dish is trying to do with this bid is not to torpedo it, but horn in on the fun and join it in a giant wireless ménages à trois.