Clearwire Investor Demands Spectrum Sale in Letter to Stanton

May 25, 2011, 12:40 PM EDT By Amy Thomson

May 25 (Bloomberg) -- A Clearwire Corp. investor asked interim Chief Executive Officer John Stanton to reexamine a sale of spectrum holdings to help boost the stock price and the wireless-service provider’s value to an acquirer.

A sale of the rights to wireless frequencies that carry voice and data signals will help establish a higher value for Clearwire’s assets and free up cash, New York-based Pardus Capital Management said in a letter to Stanton and the board last week that was circulated to other investors on May 23.

This month, Stanton ruled out selling the spectrum in 2011 after considering offers. Pardus said Sprint Nextel Corp., which owns more than half of Clearwire, may be preventing sale of the spectrum to hold down the company’s stock price and make a buyout easier later.

“Clearwire manages its business in the best interests of all of the company’s shareholders,” Mike DiGioia, a spokesman for Clearwire, said in an e-mailed statement. “We have received Pardus’ inquiry, however, it is against our policy for us to discuss shareholder interactions publicly.”

Clearwire, based in Kirkland, Washington, fell 2 cents to $4.59 in Nasdaq Stock Market trading at 12:14 p.m. New York time. The stock had declined 10 percent this year before today.

‘Scarce Resource’

Pardus said Clearwire’s spectrum has “great value” that’s not reflected in the stock price. A higher value for the spectrum would probably increase Clearwire’s valuation if the company were to sell itself, it said.

While Sprint is the most likely buyer for Clearwire, a buyout wouldn’t happen for years and Sprint probably isn’t actively working to hold down the stock price, said Michael Nelson, an analyst at Mizuho Securities in New York, who advises investors to buy Clearwire shares and doesn’t own any.

Leigh Horner, a spokeswoman for Sprint, didn’t immediately return a call seeking comment.

Clearwire reshaped itself in 2008 into a company with a faster, fourth-generation wireless service with an investment from shareholders including Sprint, Time Warner Cable Inc., Google Inc., Intel Corp. and others.

Clearwire said in November it would consider selling spectrum to raise cash after warning investors it could run out of funds as early as midyear. The company raised $1.33 billion in bonds and exchangeable notes in December and this month Stanton said he would hold on to the spectrum in spite of having multiple offers.

Stanton said the extra airwaves will give Clearwire a competitive advantage, allowing it to accommodate heavier traffic from applications like video streaming.

“The current equity price significantly underestimates the company’s spectrum holdings,” Nelson said.

Still, while a sale might boost the value of the company’s assets and stock price, Clearwire and Sprint both have an interest in holding on to the spectrum, he said.

“There’s an interest to maintain as much spectrum as possible,” Nelson said. “Spectrum is a scarce resource, and I think Clearwire and Sprint think that the value is likely to only increase over time.”

--Editors: Ville Heiskanen, Peter Elstrom

To contact the reporter on this story: Amy Thomson in New York at athomson6@bloomberg.net

To contact the editor responsible for this story: Peter Elstrom at pelstrom@bloomberg.net

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