Sprint

Delaware law and Equity Holders Agreement both stand in the way of Dish's bid for Clearwire, claims Sprint

While it has publicly voiced its opposition to Dish's attempt to purchase a large portion of Clearwire, Sprint is taking things to the next level today by filing a lawsuit against the two companies to stop the deal once and for all. In a release put out to its official newsroom, Sprint details the fact that it has filed a complaint in Delaware against the two companies, citing that if the deal were to go through it would violate not only Delaware law but also Clearwire's Equity Holders Agreement (EHA).

The current deal, which could see Dish purchasing up to the 49.5-percent of Clearwire that Sprint doesn't already own, violates several different principles in Sprint's view.

First in the way are the EHA and Charter of Clearwire, which stipulate that in order for Dish to acquire such a stake in Clearwire it would require approval by 75-percent of Clearwire's shareholders as well as approval from Comcast, neither of which have the companies obtained. Additionally, Dish's request for governance in the company to the tune of multiple board member seats would also be unobtainable, as Delaware law requires a certain board structure for fundamental corporate events. Also pertaining to board appointments are the EHA and Charter again, which allow Sprint to hold a minimum of 7 board seats -- along with committees electing several more -- directly conflicting with the number of seats Dish is requiring as part of its deal.

In the end, Sprint has a solid set of points that it believes should keep Clearwire from even considering accepting Dish's proposal, and is asking for the Delaware Court of Chancery to enforce both Clearwire's Charter and EHA and block the offer. Sprint believes that if the deal is allowed to continue, it will negatively affect shareholders by locking the company up in a deal that legally cannot be finalized. While these structural issues have been apparent (at least to Sprint) from the beginning, it doesn't seem to be stopping Dish nor Clearwire from wanting to go through with it. We'll be looking forward to the companies' official responses to this lawsuit.

Source: Sprint

 
There are 53 comments

NoNexus says:

Good, Dish needs to go after T-Mo.

It appears that Sprint has enough to kill any possible deal but you never know with the courts.

The longer this is held up though, the longer the lte rollout takes. The money from softbank would speed up the process so much...

BTW, let the sprint hate begin in 5, 4, 3, 2...

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Hiberny says:

I don't want to see Dish mess up T-Mobile.

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+1

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rustymini says:

+1

MERCDROID says:

No, Dish can have Sprint lol. The only company I want to see purchase T-Mobile is Google.

And, by the way, people can be critical of Sprint, without hating it.

brendilon says:

Pretty sure Google trying to buy a mobile service provider would be blocked by the government over antitrust issues.

Not to mention Google hasn't shown any interest in actually doing anything of the sort.

MERCDROID says:

I know. But, it would be cool, if it could happen.

mwara244 says:

Not to mention there already is a Dish-Google partnership, I think with the buying of spectrum from the FCC, and multiple deals Dish is perusing, Google might be help financing Dish in its endeavor's for the Carrier it is starting. Google would need Dish because Google on its own would be hit with antitrust suits, for some odd reason, its not like they own any other telecom, or broadcasting. Google has also been testing lte spectrum that Dish wants to use and has squired as well, and has approval from the FCC to do so through out the entire campus grounds.

Dish also said they were starting the carrier by the end of 2013, I just wonder if this will hold them up, or if they're any where still on target for that time frame. I'd love to leave Verizon for a Google carrier.

TenshiNo says:

I don't believe Google owning it's own telecom would constitute an anti-trust issue. Especially if they kept Android free and open-sourced like they do now. There would have to be some kind of monopolistic practices to prevent other companies from competing in the market before anti-trust allegations could be filed. Simply "owning" their own telecom doesn't constitute a monopoly on Google's part.

Microsoft's anti-trust cases back in the day revolved around them trying to strong-arm OEM's into promoting IE and other MS products. Google has never done any of that, even with some Android phones have been "Bing-centric".

randyw says:

Google needs to start there own Wireless Network. Verizon and AT&T would go broke along with T-Mobile and Sprint. But the government would never allow it.

crxssi says:

"Their".

And I don't think they would go broke, the existing companies would suddenly have to be more competitive. But it is, indeed, unlikely that the government would allow Google to enter that sector.

TenshiNo says:

I agree with you on the other telecoms being forced into being competitive. Look at what Google is doing with Google Fiber. I think Comcast and AT&T are getting nervous. As for Google entering the telecom sector, I don't think it would be a problem unless they way they licensed Android to try and keep other telecoms from selling Android phones.

NoNexus says:

I know you can be critical without the hate, but it seems as every other time that Sprint has been mentioned there is tons of it.

It would be interesting to see Google buy Tmo but as stated, it would never go through. Tmo needs the money, and Dish has it.

If the sprint/softbank deal goes through they are going to need that cash infusion in a bad way. I don't think dish would mess it up that bad... A few flubs and deceptive practices sure, but not too bad

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JHBThree says:

You have it backwards. The sprint/softbank deal will position Sprint much better financially than the Dish deal. If the Dish deal goes through, the new Sprint will be screwed.

crxssi says:

Agreed. Dish needs to go take a hike. They have no business buying Sprint or T-Mobile or any other wireless carrier.

NoNexus says:

That's actually what I meant. I am not sure how I mixed it up

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TenshiNo says:

Dish is only interested in Sprint/Clearwire's spectrum for wireless home internet. I suspect that if they bought Sprint, they would likely start "dismantling" the mobile phone side of things to use that spectrum for wireless home internet.

Jay Holm says:

+1

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Jay Holm says:

+1

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bkrodgers says:

I don't hate Sprint. I just sometimes feel a need to point out how much they suck. This is simply a factual observation.

I remember when they did not suck. I look forward to a day when they once again do not suck. But Sprint has earned the hate they get. They've got a lot of work, both on the network and in regaining trust, to get past that. I hope that whether it's Dish, Softbank, or someone else, that they end up with someone who will help them recover. We need more than 2 strong carriers. But that doesn't mean I could continue to pay them for a non-functional network. I did that for 1 and a half years on my last contract.

crxssi says:

It is not a factual observation, it is just your opinion or, at MOST, an observation in your particular geographical area (which does not represent all geographical areas).

return_0 says:

That is true to an extent, but there's a reason for all this hate…

For example: A study consisting of network speed tests across the company shows the following average LTE DL speeds for the major carriers:

T-Mobile - 14 Mbps
AT&T - 13 Mbps
Verizon - 10 Mbps
Sprint - 4 Mbps

Hmm…

brendilon says:

There are reasons to dislike pretty much all the major carriers. ATT and VZW are too expensive. T-Mobile has awful coverage area, Sprint is slow.

Verizon & AT&T may be too expensive for you but obviously the majority of US cell phone users don't feel that way or they wouldn't be the largest carriers BY FAR.

If the other carriers could match the coverage & speeds that Verizon & AT&T give while still charging less, then THEY would be the largest carriers.

Bishounen says:

Not necissarily Dr. Droidberg.

There are other outside factors that go into carrier selection. The biggest being the "Got it from Work" factor. That is, a company has a work contract with a carrier, and emplyee discounts are offered for personal phones via the carrier. Thus, the entire family ends up on the same carrier. AT&T and Verizon have the two largest and best priced corporate plans.

Also there is the "Always been here" factor. Kid gets a phone with the family plan, then when he or she moves to their own plan they just stay with the same carrier so they don't have to change numbers or phones. This ties into the "Got it from Work" factor as well since many of the family plans started out as employee discount plans.

Thirdly there is the "Grass isn't Greener" factor. Once on a long term contract, many users prefer not to bother changing, as they don't want to give up what they have (they may have accrued benefits by being a long-time customer, or may be grandfathered into a special plan that is a better than average value). So they will stick with a large and expensive carrier because they don't see the upside of leaving.

There are other factors as well, but those are the three largest. I would argue that for the average consumer they play a larger role in the selection of their carrier than any of the factors you mention.

crxssi says:

I don't doubt Sprint has slower LTE overall average at the moment- it is to be expected because they just started the LTE rollout and there aren't that many towers in the covered areas. I expect it will speed up after the areas are finished.

But as pointed out, Sprint has good or excellent customer service, pricing, phone choice, coverage, voice calling, and data policies.

return_0 says:

T-Mobile started even later than Sprint.

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To be fair, Sprint has always said that they will not have the fastest lte speeds

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That study doesn't speak for me or my regional area, because if it did it would say Sprint 15 Mbps.

It doesn't for me either but that is the way averages work. You may see 15 but someone else doesn't even see 2.

I regularly see 30+ down & 15+ up with Verizon in my city. Meanwhile, my friend a few minutes away who was given a Sprint flip phone for work (construction) has to leave his phone by the window to get a signal in his own house & this is a city of 200,000+!

TenshiNo says:

There can be cell dead-zones anywhere, and certainly no one is arguing that Sprint has "amazing" coverage. But one case study does not prove anything, since there can be a *ton* of factors affecting this, and that "evidence" is anecdotal at best. Most people don't realize that just getting these fancy new storm windows installed will make it difficult to get cell signal in your house. He could also have an electric appliance throwing off interference, or a problem with the wiring. Could be a dozen possible things, even besides the (albeit, likely) reason that Sprint doesn't have good coverage near his house.

Personally, where I live, I get good coverage (almost) every where I go regularly. And I get decent speeds. It's usually in the 4-6 mbps range, but how much speed do you really need on a cell phone? That's 6 times faster than DSL was just a few years ago, and just about as fast as most people's broadband internet connection at home.

Certainly "faster" is better, but that doesn't mean that 4-6 mbps "sucks".

return_0 says:

I meant country, not company. How did that happen?

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derface19 says:

Hm. maybe because Sprint's sites never ran on fiber connections? lol But hey, Sprint haters keep hating. I'm Enjoying these 4G speeds that has out done Verizon even though a Verizon tower is behind me and I still get better service with a sprint tower a mile away. A shame! There are no nextel towers in my town left, in 10 days. 3G/Voice 800 will become officially live and nextels spectrum will be used. I can NOT WAIT for 4G/800. The GS4 will have tri-band support by the end of the month btw.

ZigmunD says:

ЯННП. :(

XChrisX says:

Sprint just needs to give up, and let Dish, or Softbank buy them out, and call it a day!

ab304945 says:

Sprint wants soft bank.

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SPRTUSR says:

You haven't been paying attention

icebike says:

Quote:

Dish's request for governance in the company to the tune of multiple board member seats would also be unobtainable, as Delaware law requires a certain board structure for fundamental corporate events. Also pertaining to board appointments are the EHA and Charter again, which allow Sprint to hold a minimum of 7 board seats.

Sounds like Sprint wants to have its cake and eat it too.
Sprint gets 7 board members not elected, by the share holders at large, but nobody else gets that privileged? Hmmmmmm.

In the end, these attempts to block via lawsuit seldom prevail. The court will probably find that owning 50.5% of the stock and 7 seats on the board gives Sprint all the bites of the apple to which they are entitled.

eshropshire says:

I would guess the biggest reason for this lawsuit is to provide additional maneuvering time for Softbank. Like you said most of these suits don't succeed, but right now Sprint is playing for time.

troyboytn says:

and....Sprint should have the right to those seats considering that it has been propping Clearwire up with 80 million dollars per month for some time now just to keep Clear in business. These "loans" directly transfer into preferred stock in repayment. After the next loan from Sprint to Clear goes through next month, that will systematically move Sprint's owner stake in Clear at somewhere around 68% so yeah, those 7 seats are warranted.

JHBThree says:

Sprint gets 7 board members because they own 50.5% of the company, and have spent hundreds of millions of dollars keeping clearwire afloat.

But that has no bearing on what Dish is asking. The only reason dish wants this is so that they can prevent Sprint from taking control of the company, hence the 3 board members.

TenshiNo says:

You are correct, Icebike, but I think you missed an important point:

The buyout of Clearwire from Dish would require 75% of the shareholders to vote in favor. But Dish/Clearwire are trying to get around this, since it *obviously* can't happen because Sprint is 50.5% of the shareholders. That "side stepping" of Clearwire acting without the consent of its shareholders is what Sprint is trying to block.

sURFNmADNESS says:

Sprint is still not stating why it wants to accept an offer worth $5 a share less for a foreign soil based company to own it. There is no stated guarantees with this cheaper deal. Lets hear the true, who gets to walk away with how much of the sale of Sprint since you have such high standards.

BTW, your supposed high standards bill every Sprint customer for 2+ years now for a high speed network that still is lacking in the most of the top 30 if not 50+ cities which you claim service. Test have proven that even small carriers like US Cellular have faster data service by 2x minimum if not more.

Dish has a proven track record of keeping prices low while being competitive with offerings. Softbank has admitted that Sprint purchase would not be the only American purchase. That they plan on eliminating competition by buying others out to raise prices without anyone else to challenge their market share...

see the WSJ blog for updates on the VS. Thanks to spam blocks I was unable to post the link here.

DWR_31 says:

Just to be sure, isn't Verizon and AT&T already doing that.

From the DARK AC App!

ekincaid says:

Have you ever dealt with Dish? If you have then you might have a little insight into why they don't want Dish. Only a guess from my experiences.

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NoNexus says:

There was something said on here I think about why sprint wants softbank offer and not dish.

I am not sure that I remember correctly, but by taking less now from softbank, they believe that long term the deal will be worth more overall.

I think there is an article on here about it from less than a month ago.

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JHBThree says:

Familiarize yourself with the terms of the deal. Although Dish's offer is technically higher, it involves significantly more debt, significantly less cash, and a much weaker post-merger financial position.

Softbank, on the other hand, has upped the amount of cash they're offering, which is what the new company ACTUALLY needs. The last thing Sprint needs is more debt and that's all Dish is offering.

Channan says:

Neither company is actually buying Sprint. They're buying a majority stake in Sprint so they gain control of the company. If one person was straight up selling their business to another company, then it makes sense to go with the highest offer.

But in this case, SoftBank might be offering less up front, but they have more money than Dish to invest in the network and possibly benefit the company more down the road. Dish/SoftBank won't own all of Sprint but they will control it.

That being said, which would you rather sell the majority of your company to? Dish, who's offering more up front but is spending all they have to get it, or SoftBank, who has plenty of money to invest in your network and possibly gain you a lot more money in the long run?

JHBThree says:

Plus, Softbank uses almost all of the same technology as Sprint, which will make network costs significantly lower for both.

pattavino says:

I don't know about anybody else but I think that Spring picture is probably the best reoccurring photo on here. :-)

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pattavino says:

Sprint not spring. And here is an AC app feature I would like, being able to edit comments. Please, pretty please.

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ncfanboy says:

This is really starting to get me upset dish is really getting desperate i really dont want them to get access to Sprint or Clearwire. Charlotte is an active LTE market and as of right now it has totally stalled Sprint and softbank needs to get back to completing the network vision. I hope that justice is swift and quick lets get this network vision done. Sprint has until February of next year and if it does not get better then i might have to move to someone else.

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keith2k1 says:

I don't want to see Sprint in anything until they get a new CEO.

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