While Sprint Nextel may have designs on Clearwire, a minority investor in the struggling cellphone network operator is calling on the company to remember its smaller shareholders.
Mount Kellett Capital Management, a $7 billion hedge fund that holds a 7.3 percent, sent a letter to Clearwire's board on Thursday asking the company to consider selling off what it called excess wireless spectrum. Such a sale could bring in money that would help stave off default at the network operator.
The issue at hand is that Clearwire already needs about $1 billion to continue building out its network and refitting it for the latest in wireless data technology, Long-Term Evolution. And it already carries $4.2 billion in long-term debt while losing money for at least the past five years.
What Mount Kellett is worried about is what analysts suspect is the most likely end for Clearwire: namely a takeover by Sprint, which has sold a majority stake to the deeper-pocketed SoftBa nk of Japan. Sprint's chief executive, Daniel Hesse, has said that the deal will give his company the resources to take part in the mergers activity he has long believed is necessary.
Instead, Clearwire should run an auction of what the hedge fund called its spare spectrum, which could fetch higher prices from any number of wireless companies looking to build out their own networks. Those could include AT&T, which agreed in August to buy NextWave Wireless for $600 million to gain its spectrum; a revitalized T-Mobile USA, which plans to merge with MetroPCS; or Dish Network, which has dreams of offering cellphone service.
Any of those would be a better alternative than selling out to Sprint in a distressed state and at a bargain-basement price.
“Holding on to excess spectrum and letting that value accrue to Sprint, so that Sprint can purchase the company's excess spectrum cheaply would be an egregious violation of stockholder interests,†Jonathan Fiorello , Mount Kellett's chief operating officer, wrote in the letter.
In its letter, however, Mount Kellett acknowledges that it faces a pretty big hurdle: Sprint, which is already is a business partner to Clearwire; owns more than 50 percent of the company; and has picked 7 of the 13 board seats.
So the investment firm has called on the wireless service provider's directors to remember their duties to all shareholders. Failing to do so might invite more serious action, Mr. Fiorello wrote.
Should the board fail to take the necessary steps and find itself needing to capitulate to a distressed sale, we will have no choice but to consider whether the board has the best interest of the Company and ALL of its stockholders in mind or only those of its controlling stockholder. In that event, we will consider all available options to prevent or redress the destruction of stockholder value.
A Clearwire spokeswoman wasn't immediately availa ble for comment.
