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Originally published October 18, 2012 at 7:11 PM | Page modified October 19, 2012 at 6:26 AM

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Sprint gains majority of Clearwire by buying McCaw’s stake

Sprint will pay Eagle River Holdings, the investment firm owned by telecom pioneer Craig 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 Thursday.

Bloomberg News

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Sprint Nextel, the company that agreed to sell 70 percent of itself to Softbank, plans to acquire telecom pioneer Craig McCaw’s stake in Bellevue-based Clearwire, gaining a majority of the wireless carrier.

Sprint will pay Eagle River Holdings, 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 Thursday.

McCaw, who co-founded Clearwire, retired as chairman of the company two years ago.

Sprint has control of the company’s management, including the power to veto some spectrum sales to third parties, and doesn’t need to consolidate Clearwire’s debt, said one person with direct knowledge of the situation.

Sprint has owned a majority of Clearwire in the past without taking control of the company, Philip Cusick, an equity analyst with JPMorgan Chase, said in a report to investors.

Sprint keeps the right to appoint seven of Clearwire’s 13 members, one of which is independent.

“While Eagle River would lose its right to nominate a board member in this transaction, we would not anticipate any change to the board in the near term,” Cusick said.

Sprint has owned as much as 56 percent of Clearwire in the past without consolidating the debt, he said.

Sprint has more than $4 billion of debt coming due next year, while Clearwire has $2.9 billion of debt coming due in 2015, Bloomberg data show.

After the Sprint announcement, Standard & Poor’s said its ratings and outlook on Clearwire’s debt are unchanged.

Clearwire will run out of cash by the middle of next year without external sources of liquidity, according to a statement Thursday from S&P.

Both Sprint spokesman Scott Sloat and Clearwire’s Susan Johnston declined to comment.

Sprint, which already held 48 percent of Clearwire, sought the majority stake for added sway over the fate of the company’s wireless-networking capabilities, including lucrative airwaves needed to deliver mobile calling and data.

That stands to make Sprint more attractive to Tokyo-based Softbank, which is paying $20.1 billion for most of the third-biggest U.S. mobile- phone company.

“Softbank wants firm ground in the U.S.,” said Jeff Kagan, an independent telecommunications analyst.

“It gives the combined company much more spectrum, much more ability to deliver services,” Kagan said.

Sprint, based in Overland Park, Kan., has no immediate plans for an outright takeover of Clearwire, people with knowledge of the matter said this week.

Backing by Softbank gives Sprint more firepower to use in its contest with AT&T and Verizon Wireless.

Too much money

Still, a full Clearwire acquisition is seen as too expensive, the people said.

The price for the bundle of shares will be $2.97, consisting of $2 per Class A share and $13.98 for Class B interest, according to the filing.

Clearwire shares closed down 10 percent to $2.03 Thursday.

Sprint gained less than 1 percent to $5.78.

Sprint had also approached Comcast and Intel recently to discuss acquiring those companies’ stakes in Clearwire, according to the people with knowledge of the Eagle River deal.

It made little headway, they said.

Sprint’s overtures to Comcast and Intel were reported earlier by The Wall Street Journal.

Softbank will pay $12.1 billion to Sprint shareholders, and the deal includes $8 billion of new capital, the companies said this week.

The transaction will help Softbank enter the U.S., a market that’s still growing in contrast to Japan, where handset shipments tumbled 27 percent over the past five years.

Sprint said this week it expects the U.S. Justice Department’s review of the Softbank deal to be completed within an initial 30-day review period and won’t warrant an extended investigation.

AT&T said gaining control over Clearwire gives regulators cause to pay closer heed.

“Softbank’s acquisition of Sprint and the control it gains over Clearwire will give one of Japan’s largest wireless companies control of significantly more U.S. wireless spectrum than any other company,” AT&T spokesman Brad Burns said in a statement.

“We expect that fact and others will be fully explored in the regulatory review process,” he said.

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