Dish trumps Sprint's offer for Clearwire with $2.3 billion bid

Dish Network Chairman Charlie Ergen says he wants to enter the mobile broadband market.

Dish Network put in a bid for Clearwire Corp. on Tuesday that trumped Sprint Nextel's $2.2 billion offer, setting the stage for a takeover battle for the wireless service provider that owns crucial mobile spectrum.

Dish's $2.28 billion offer appeared to affirm the satellite television provider's ambitious plan to buy its way into the wireless services industry on which it has already spent $3 billion acquiring much-needed capacity.

Dish's straight-talking Chairman Charlie Ergen says he wants to enter the mobile broadband market, and one option is partnering with another operator to do so. But some analysts have speculated that Ergen is amassing spectrum — an increasingly valuable commodity as use of media-consuming mobile devices such as tablets intensifies — to flip it for a handsome profit.

The success of his latest move hinges on a number of conditions, not least of which is approval by wireless carrier Sprint, the No. 3 U.S. carrier that owns just more than 50 percent of Clearwire and is also keen to buy up the rest of the company.

Clearwire made it clear Tuesday that the proposal of $3.30 per share — surpassing Sprint's $2.97 offer — was only a preliminary indication of interest and subject to a number of uncertainties, conditions and approvals.

Significantly, it said it had not yet drawn on financing pledged by Sprint as part of the carrier's acquisition agreement, to allow it to consider Dish's proposal.

"It's very difficult to see how the deal would work over Sprint's opposition," said Chris King, a Stifel Nicolaus analyst. Dish is offering a "decent premium but contingent on financing and Sprint waiving certain conditions — that they've already said they're not going to waive."

Some analysts saw the bid — announced during the Consumer Electronics Show in Las Vegas, with much of the technology industry in attendance — as merely a power play, or payback for Sprint, with which it has locked horns in the past over regulatory approvals for spectrum acquisitions.

Others saw it as confirmation that Ergen, the billionaire media mogul who in 2011 swooped in to take over failed video store chain Blockbuster, is serious about becoming a wireless provider.

"It does show that he is more likely than not committed to the (wireless) business but if he doesn't get it, the worst case is that he forces Sprint to pay a bit more money," said Matthew Harrigan, an analyst at Wunderlich Securities.

"If it works, it could be a home run but the execution risks are high," he added.

Sprint said Tuesday it believed Dish's offer is inferior to its own and not viable.

Clearwire shares were trading up 1.1 percent at $3.18 after-hours Tuesday after closing at $2.90. Sprint was down 2.5 percent, and Dish stock dropped 1.3 percent to $35.50.

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Clearwire said the special committee of the board of directors has not made any change to its recommendation of the current Sprint transaction. Ergen said Tuesday in Las Vegas that he was looking forward to working with Clearwire's special committee on the board, but waved off any other questions.

"Spectrum is like oil, water and gold," was CEO Joe Clayton's only comment in Vegas.

Ergen has already piqued the interest of at least one influential player. Clearwire's second largest shareholder, Crest Financial, said it was looking forward to hearing details of Dish's offer, which it said proved the point that Sprint's offer for Clearwire — which it opposes — was inadequate.

"Sprint has more issues on their hands as of this afternoon at 3 o'clock than their LTE network," T-Mobile USA CEO John Legere told reporters.

It is unclear what the latest development means for Sprint's plan to sell 70 percent of itself to Softbank Corp. of Japan for $20 billion.

Dish has been spoiling for a fight with Sprint over that deal, which gives the Japanese telco a foothold in the world's most lucrative wireless market.

Last month, it asked the U.S. telecom regulator for more time to file an objection to Sprint's proposed sale to Softbank in light of its intention to buy out Clearwire.

Some observers say Tuesday's bid cements Ergen's reputation as a wildcard and a risk taker. Ergen has raised eyebrows in past years by making acquisitions not core to his company's assets, which are concentrated heavily in pay TV. He founded Dish Network, the No. 2 satellite provider in the U.S. with 12 million subscribers.

Dish bought video store chain Blockbuster and companies with wireless spectrum such as DBSD and TerreStar in 2011. Ergen also told investors the pay TV industry has matured and that the company he founded in 1980 — after selling satellite dishes off the back of a truck — may become something other than a TV provider.

Additional reporting by Liana Baker and Nadia Damouni.

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