February 4, 2013
Clearwire Corp. said it was still considering a merger proposal from satellite-television operator Dish Network Corp., as Clearwire shareholders continued to oppose the wireless broadband operator's deal to be acquired by Sprint Nextel Corp.
Clearwire said in a regulatory filing Friday that it wouldn't tap financing made available by Sprint for this month-a step that could have prompted Dish to withdraw its proposal to buy Clearwire for $3.30 a share. Clearwire has agreed to sell itself to Sprint for $2.97 a share. Clearwire continued to recommend that shareholders approve the deal with Sprint, which already owns about half of Clearwire and probably could block a competing deal. By continuing talks with Dish, Clearwire kept alive the possibility that Sprint would raise its offer. The balancing act is tricky; Clearwire is in a tough financial spot and had weighed a restructuring before signing the deal with Sprint.
The battle for control over Clearwire, which was the first telecommunications company to launch nationwide wireless broadband service in the U.S., has implications for bigger players because of Clearwire's network and significant holdings of wireless spectrum. The tussle pits Dish Chairman Charlie Ergen against Softbank Corp. Chairman Masayoshi Son. The Japanese company last fall agreed to buy control of Sprint for $20 billion, providing entry into the U.S. Mr. Ergen owns billions of dollars in wireless spectrum but needs a network to offer mobile service. Mr. Son, meanwhile, wants Clearwire's network to speed Sprint's rollout of fourth-generation wireless service. Clearwire said in the filing that Executive Chairman John Stanton met with Mr. Son in November to discuss a deal and spoke regularly with Mr. Ergen to discuss a transaction. Sprint and Dish spokesman declined to comment.
Clearwire made its disclosures in a proxy filing that detailed efforts that it had made in recent years to secure financing, strike a deal with suitors and line up buyers for its service. The company said it was in regular contact with Dish over a possible deal as it was closing the agreement with Sprint. The details were aimed at showing shareholders that Clearwire got the best deal it could. In addition to agreeing to buy the shares in Clearwire that it didn't already own, Sprint agreed to provide up to $800 million of financing to Clearwire through notes that convert into stock-an arrangement that gradually would give Sprint a bigger stake in Clearwire. Clearwire can sell Sprint $80 million of the notes each month for up to 10 months. Clearwire didn't draw on the funds in January and said Friday that it didn't draw on them for this month either. That kept Dish's deal hopes alive, since the company said it would withdraw its proposal if Clearwire drew on the funds.
Dish's proposal isn't yet a formal offer and includes several conditions. Clearwire is trying to persuade Dish to remove many of the conditions, such as the right to appoint Clearwire directors, a person familiar with the matter said. Clearwire has said it couldn't grant that request without Sprint's consent. Clearwire continued to recommend the Sprint deal to shareholders. Changing its recommendation to favor the proposal from Dish would allow Sprint to terminate its agreement with Clearwire, adjust its offer or press ahead with a vote for its existing offer, people familiar with the situation said. The next significant dates for the merger battle are at the end of February, when Clearwire will have to decide whether to take financing for March, and an eventual Clearwire shareholder vote on the Sprint deal. Wall Street Journal
Time Warner Cable Inc. Chief Executive Glenn Britt will step down at the end of the year, said a person familiar with the matter, amid growing worry among investors about the company's operational performance. Mr. Britt, who turns 64 years old next month, will leave at the expiration of his current contract. His contract was extended in July 2011 to expire at the end of 2013, securities filings show. A leading candidate to succeed him is Rob Marcus, the cable operator's president and chief operating officer, said people familiar with the situation. Time Warner Cable is the fourth-biggest distributor of pay television in the U.S., after Comcast Corp., DirecTV and Dish Network Corp. "Glenn Britt is currently under contract with Time Warner Cable. If and when that changes we will announce it," a spokesman for the company said, in response to a question. Mr. Britt, who has been in the cable business since 1972, has been CEO since 2001.
News of his pending departure came a day after the company's stock price dropped 11% after it reported a decline in fourth-quarter earnings, partly due to higher taxes and programming costs. The quarter also showed a slowdown in broadband-subscriber growth and video-subscriber losses that a company executive described as "a disappointment." In the first three quarters of 2012 Time Warner Cable's video-subscriber losses worsened, even as bigger cable operator Comcast improved its video-subscriber losses. Some analysts expect Comcast to report video-subscriber growth for the fourth quarter when it releases earnings Feb. 13. At Time Warner Cable, there is "still no evidence of operating momentum," said Michael Senno, an analyst at Credit Suisse, in a research report published after Thursday's earnings report.
Even so, Mr. Britt wins plaudits from analysts for pursuing a shareholder-friendly strategy of returning cash through stock buybacks and dividends over the past few years. Before Thursday's selloff, the stock had risen around 300% since it was spun out of Time Warner Inc., its former parent, in March 2009. "I think he's done a fantastic job on the equity broadly, which the stock price shows," says Vijay Jayant, analyst at ISI Group LLC. Time Warner Cable's shares on Friday rose 1% to $90.27 in 4 p.m. composite trading on the New York Stock Exchange. Mr. Jayant pointed out that Mr. Britt has led the company to be one of the "most aggressive in return of capital to shareholders."
Mr. Britt's decision comes at a pivotal point for the pay-TV industry. All pay-TV operators are grappling with rising programming costs and a saturated market, where nearly 90% of households subscribe to some form of pay TV. At the same time the availability of online video has prompted concerns that people will start to disconnect their pay service. Mr. Britt has publicly emphasized broadband, describing it in 2011 as becoming an "anchor service," a historic shift for a company built on selling TV service. Comcast has taken a different approach, making clear it still sees video as a core service. One result has been that Comcast has been more aggressive in converting its video transmission technology to all-digital, which analysts say has allowed it to improve its video services and reduce some costs. Mr. Britt said he believes in a more evolutionary approach, arguing Thursday that going all digital quickly is "disruptive to consumers." Time Warner Cable's relatively weaker performance has been "partly operational, partly technological," said Mr. Jayant.
Mr. Britt has emerged in the past couple of years as an outspoken critic of programming costs, particularly in sports and fees charged by broadcasters, and an advocate for slimming down the bundles of channels that cable operators sell under arrangements with entertainment companies. He warned late last year that the cable operator would begin dropping channels that "cost too much relative to the value of the service." So far, however, Time Warner Cable has only dropped a few channels, such as small arts channel Ovation. Mr. Britt has also complained about rising sports programming costs, although Time Warner Cable has also invested more in sports programming by launching channels in Los Angeles to air the Lakers basketball team and this week partnering with the owners of the Dodgers on a new network for Dodgers games. "While program cost inflation reiterated the margin pressure video providers face, Time Warner Cable may have escalated this further with its new Dodgers deal," Mr. Senno wrote in his note this week. Time Warner Cable has said, however, that its recent sports investments fit into its effort to control programming costs over the long term. Wall Street Journal
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