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  • What Happens When There Is No Content For Netflix To License?  [View article]
    Actually cable is a distributor of Netflix because cable operators are the providers of the broadband pipe, and Netflix is the single highest use case for upgrading to high speed broadband (and differentiating versus DSL). If Netflix actually drags in an up-charge for faster pipe that the cable guys are selling, that's far higher margin (90%+) to the cable guys than what they are getting as MVPD video distributor (~30% margin). The cable guys are actively promoting Netflix as the "killer app" for cable industry's better broadband product -- check out the super bowl ad by Time-Warner Cable that ends with ENJOY Netflix BETTER ...

    http://bit.ly/12GfvPn#!

    The cable guys aren't worried about chord cutting (only newspaper reporters and bloggers are) and the cable industry will ultimately enbrace and become paid distributors and billing agents for Netflix programming network. Netflix doesn't compete against cable; Netflix is a subscription programming/curation network that competes against pay cable subscription services such as Showtime, Starz, Encore, and HBO (albeit without the late night fare of all those programming neteworks).

    ESPN is as worried about Netflix as it would any of the other pay cable subscription services -- actually HBO and Showtime have more sports content (boxing, UFC, sport-stalk) than Netflix does (which is "none" other that Rudy, Hoosiers, and The Replacements movies).

    I predict that you will see someone: maybe Charter, Cox, Brighthouse, or even TWC become a distributor of Netflix product (and get rev share as it is already the current case with Apple TV, which is like a virtual MVPD) within the next 18 months as just another premium pay network to ride on the cable operator's high margin fat pipe.

    I will agree with you that it's not rocket science and also people did discover eve nbefore rockets that the Earth wasn't flat.
    Apr 23, 2013. 04:45 PM | Likes Like |Link to Comment
  • What Happens When There Is No Content For Netflix To License?  [View article]
    Well you are sadly mistaken if you think the Disney studio chief cares what his colleague at ESPN gets from his affiliate fees because it is not in the studio chief's budget. And you have no clue to even consider why ESPN, which is anchored around a linear product that is largely live broadcast content would have any relevance to the studio pay cable 1 monetization. Whethere the output deal appears on Starz, Showtime, or Netflix has no bearing on ESPN's product unless you are suggesting that ESPN-7 will be a new movie premium pay network?

    Similarly the ABC broadcast network has a different agenda relative to his first-run product and is the business unit responsible for Hulu. ESPN itself is trying to bypass the MVPD's. Disney does not care about the cable operators, Time-Warner doenst care about the cable operators (since it spun off TWC), Fox doesn't care about the cable operators, Viacom doesn't care about the cable operators, CBS doesn't care about the cable operators, maybe Comcast's cable unit cares about the MVPD biz but NBC Universal is running its business as best it can to maximize returns to the networks, studios, and its programming channels. Every single one of them sells content to digital delivery platforms -- they do that because that's where the audience is. The CW (CBS and TWX) was breakeven until its licensing deal with Netflix. Each of the televiison production studios are competing to be the produciton venue for Netflix's shows just like they do today to produce shows that may or may not broadcast on their own sister programming networks.

    You are sadly mistaken if you think Disney's CFO actually thinks that ESPN competes with Netflix or Hulu -- and further mistaken if you dont think that same CFO is not trying to figure out every single day how to recoup the margin leak that is being stripped by the MVPDs. And believe me the MVPD's hate ESPN the most because they have the least leverage against ESPN's aggressive tactics to extract value for its content (on the backs of the MVPD's margin in the cable operators view). Basically you can't get clear the difference between distributors (MVPD's, networks, theaters, EST, or physical media retailers) and content producers (studios, programmers, production houses).

    Of all the top media conglomerates, only one is long MVPD and that is Comcast, and the whole point of the Comcast-NBC Universal deal was for Comcast shareholders (I am one) to diversify away cash flow stream from distribution business. Fox sold DirecTV and Time-Warner spun off Time-Warner Cable. Get the picture yet. The next time you sit down for breakfast with Jay, ask him how's he looking forward to that $300MM a year in licensing revenue - twice what Starz could afford to pay. He'll even pick up the tab probably.
    Apr 23, 2013. 03:45 PM | Likes Like |Link to Comment
  • What Happens When There Is No Content For Netflix To License?  [View article]
    OMG, just where the movie theatrical distribution business would be if the studio stopped selling them their content product......

    ....but then how does the studio sell its movies?

    content, distribution, content, distribution, content, distribution, lets see who has the leverage -- maybe they both cant live without the other.

    you confuse the content owner's interest as alligned with that of the MVPD's in perpetuity. Each of Disney's ESPN via Watch ESPN, and Time -Warner's HBO via HBO Go are attempting to find alternatives to the gatekeeper role (and huge reveneu leakage) that cable operators currently extract. Disney went with Netflix rather than Starz for a longterm exclusive (probably until 2021 at minimum) during pay cable 1 window because it believed that Netflix was the best way to monetize its studio content. Similalry it chose to have an additional venue for its children's library product despite Disney having its own Disney Channel streaming service (but the latter was constrained by authentification requirements with MVPDs) because it wanted the broadest audience for its children content, both to monetize its distribution value, and to maximize the visibility of its various character franchises that are otherwise monetized (in Disney stores, via licensing, on broadway etc). This is in spite of the fact that Disney is part owner of Hulu while it owns zero ownership in Netflix.

    The point is that content owners will seek the most appropriate distribution that best support their strategies and what they feel will best monetize their assets -- for some, this would involve a partnership with Netflix either exclusively or on non-exclusive basis, depending upon the nature of the content.

    So the scenario that you paint of the content owners starving Netflix distribution in favor of protecting the MVPD's who they believe are arrogant monopoly gatekeepers who live off of the backs of the content owners is in a word, laughable. Streaming licensing revenues is what is making these guys' budgets and they will become increasingly addicted to that revenue stream. Like bees to honey or whores to money, the content owners will gravitate to distribution that makes money for them. End of story. If there is another venue with a bigger audience that can monetize better, than the hell with Netflix BUT until that happens, Netflix is becoming the dominant venue, and the leverage is shifting to distribution as there is no viable altrenative right now that can monetize certain content better than Netflix. You mainly think that distribution is commoditized. That window is clsoign or already closed, or rather the cost of entry is rapidly going higher. Where does a new SVOD get it s content? all themajor studios are locked up for long-term exclusives through 2018-2020 except Universal whose current deal with HBO doesnt expeir until 2016. Most of back seasons of serialized drama is now spoken for until 2015-2016 time frame. so the only point of entry is back catalog non-excluisve junk, unless you try to participate in the pay-per-view window, but that is non-exclusive distribution and only available on an agency model. So teh moat is getting wider dude.
    Apr 23, 2013. 09:55 AM | Likes Like |Link to Comment
  • Not So Fast With The Countrywide Settlement  [View article]
    In your prior post as well as others referencing Mark Palmer (BTIG analyst who is excellent advocate for MBIA long position) often equate the rep and warranty issue on BAC's private label exposure as identical to that beign adjudicated in MBIA and others. It is important to note that MBIA, and Assured and Syncora's judgements from Crotty and Rakof that favored the monolines were based upon the application of Insurance Law, and therefore while the issues are analogous, they are not necessarily identical between the private-label and monline put-back litigation.

    I frankly see the case for BAC's position on reps and warranties as being better in the private-label case, but nevertheless its ability to consummate the $8.5B settlement is largely dependent upon the Aritcle 77 review whether BNY as trustee acted in an "arbitrary and capricious" manner in agreeing to the settlement on the trusts' behalf. The legal standard governing the trustee's action on behalf of the trusts' beneficiaries is untested -- I frankly question the trustees ability to take action if it were NOT requested to act by the minimum 25% of holders that govern all those truste indentures.

    However, where BAC is really playing with fire is to let Branston judge under New York law on "de facto merger" whether there is successor liability that would pierce the corporate veil of Countrywide. IMO, BAC is relying overly on California court ruling in its favor on successor liability that applied Delaware law, because the legal nexus of the California suit made sense to revert to Delaware. An unfavorable successor liability ruling by Branston in the BAC-MBIA litigation in New York state court would certainly be appealed by BAC if BAC loses but it creates a huge overhang that jeopardizes one of the fundamental premises relied upon by the BNY's trustee in the private-label settlement. I am certain that BAC is substantailly hedged (via its long position of MBIA CDS) against a rehabilitation event at MBIA Insurance so it may actually benefit from a regulatory takeover at MBIA Insurance, but what I dont understand is BAC's willingness to have a ruling by Branston on successor liability that risks jeopardizing the private label settlement. Although presumably it's to BAC's advantage to drive MBIA as close to the wall as possible, unwind its CDS position on MBIA, before then agreeing to settle the R&W put-back claims, which then largely benefits BAC itself given it is CDO coutnerparty that MBIA Insurance has wrapped.
    Apr 22, 2013. 07:37 PM | 4 Likes Like |Link to Comment
  • A Clearwire Update: Bankruptcy And Default As Clearwire's Ace In The Hole  [View article]
    GMAO .. that's guffawing.

    Verizon matched the implied EV per mhz-pop offered by Dish but did so on the less attractive EBS spectrum (that Dish proposed to leave in the Comapny for his back-end offer) and presented a structure that Sprint may actually not mind as it lets Sprint off the hook for having to cash out the public at this time, which was its and Softbank's original strategy -- read the proxy. The other strategic investors were willing to sell to Sprint so long as they got what McCaw got at $2.97/shr equivalent. It was CLWR BOD that insisted on a deal that allowed the public minority investors to tag along with the SIGs in their sale to Sprint. Whether the public minority votes for it or not, Sprint will purchase the shares held by the strategics (and therefore all the control shares) along with exchanging the exchangable debt and end up with up to 70% of the Company (depending upon how much of the debt CLWR draws). It just might be the price to pay if in order for Sprint to approve the assignment of some of the leased EBS spectrum to Verizon from CLWR, CLWR is required to draw the rest of the note and commit to the accelerated build.
    Apr 16, 2013. 08:16 PM | Likes Like |Link to Comment
  • A Clearwire Update: Bankruptcy And Default As Clearwire's Ace In The Hole  [View article]
    Maybe it's because Verizon is not offering to take the nearly $5B in debt, and the operating burn asosicated with the exisitng WiMax network, or all the employees and their salaries and severance, as well as other contractual commitments. The gross price offered is BEFORE reducing the price by the present value (using Verizon's discount rate?) of future spectrum lease obligations (and renewals) for the EBS spectrum ("which can be substantial" according to the CLWR's proxy filing). Verizon seemingly learned from the Dish asset strip deal structure (and why that structure cant get done) and instead offered to pay only for an assignemnt of the leased spectrum. This in effect a paid up front assignemnt of the leases -- it's not clear that technically leasing spectrum or an assignment thereof requires FCC approval as there were various rulemakings perviously to allow spectrum leasing (partly to allow the major carriers participate in the auctions by leasing from a "small business bidder" with bidding credits that were imposed by Congress). So this may be able to be accomplsihed with almost immediate effect.

    Sprint may actually not object to that construct, as it will take the CLWR default card off the table, let the public minority shareholders vote down the cash merger so that Sprint doesnt have to buy out the public (at least not now, but wait until the standstill expires), and then use Verizon's cash to pay down expensive CLWR debt, as well as to fund some of CLWR's hot spot network to be built for its sole customer Sprint, and then further cement the demand and ecosystem for TDD-LTE infrastructure and devices if Verizon has a vest interest in that 2.5ghz spectrum band.
    Apr 16, 2013. 08:01 PM | Likes Like |Link to Comment
  • A Clearwire Update: Bankruptcy And Default As Clearwire's Ace In The Hole  [View article]
    In a bankruptcy, it is not clear (sic) that a 353 auction would necessarily be pursued; in fact it is highly improbable since it wont have th esupport of either the board or the impaired calss of stakeholders (equity). In a chapter 7 liquidation, the assets are liquidated for the benefit of creditors and stakeholders.

    In chapter 11, the debtor attempts to reorganize to get teh best outcome to the impaired stakeholder class, and any Plan of Reorganization requires approval of 2/3 in absolute votes (i.e. Sprint) and 50% in numerosity of that class. 353 sales are only pursued when the debtor is in need of liquidity and cannot otherwise protect value.

    If I were Sprint, I would supply the DIP financing which will give it the attributes of control, offer a cash payout to bondholders at par, and roll the equity (all the equity) in place but flush all the governance attributes. Maybe even do a backstopped rights offering to raise another $2B of equity to pay down the debt further, while simultaneously offering to cash out those who do not want to or cannot kee up with the rights offering.
    Apr 16, 2013. 12:35 AM | Likes Like |Link to Comment
  • A Clearwire Update: Bankruptcy And Default As Clearwire's Ace In The Hole  [View article]
    this would be interesting bankruptcy case where the equity holders will control. debtholders who are not impaired dont even have a vote -- a plan that cashes out the debt at 100% of par plus accrued isn't even voted upon by the creditor class. if none of the creditor classes are impaired then you are left with the vote of more junior classes of cap structure in order to confirm a plan of reorganization - which means 2/3 of the common equity class and 50% in numerosity, which actually may be a lower effective voting threshhold for Sprint than the current merger vote.

    I agree with the author that a bankruptcy filing in effect throws away the Company's existing governance structure and the question is whether the debtor can pursue 353 asset dispositions over the objections of the equity class (which is controlled by Sprint under a bnakruptcy las context). I am not as convinced that will in fact be the case where Sprint loses more control in bnakruptcy court then currently as the author posits. The CLWR board of directors would still be in possession of exercising exclusive control as "debtor in procession" with an exclusive right to present plan of reorganization, and its fiduciary responsibility at that point in bankruptcy court (assuming that the creditors are unimpaired) would be to ALL members of impaired equity class, not just the public minority holders.

    I can imagine a POR whereby all the debt is made-whole and cashed out (so they don't vote) and is funded instead by an underwritten equity offering, backstopped by Sprint, whereby the shareholders would "pay to play". Now that would be interesting.
    Apr 14, 2013. 03:39 PM | 2 Likes Like |Link to Comment
  • Clearwire (CLWR) receives yet another alternative financing proposal from a money manager. Hedge fund Aurelius Capital is offering Clearwire $80M in convertible debt financing as a replacement for the funds it's receiving from Sprint (S). Last week, Crest Financial offered Clearwire $240M in convertible debt financing. Though taking Sprint's money and still officially supporting its $2.97/share buyout offer, Clearwire still hasn't made a final decision on Dish Network's $3.30/share bid.  [View news story]
    Remember that Clearwire was the entity that McCaw bought that was an equipment manufacturer that made "pre-WiMax" infrastructure, as the WiMax standard was still being developed back in the late 90's and early this century. The principal difference in the "old Clearwire" was that it was targeted primarily at a fixed wireless broadband opprtunity as a means to replace DSL while Nextel envisioned Xohm as a mobile service (thus increasing dramatically the capital intensity of the business model). At the end of the day the sugar daddies (Intel, GOOG, etc) were primarily interested in a mobile strategy so Clearwire's strategy evolved to that which it could raise strategic capital with.

    It is all moot at this point, a lot of "could of, should of". At this juncture, only thing matters is whether the minority shareholders will vote for the merger after CLWR misses the June 1st coupon and goes into its 30 day grace period. Assuming that the minority shareholders reject the merger and Sprint then purchases the Strategic Investor Group's ramining stakes, it then comes to whether Sprint provides additional funds to let Clearwire make the coupon by July 1st (and how dilutive that will be) in order to prevent the BK filing that Clearwire is threatening Sprint with.
    Apr 14, 2013. 10:45 AM | Likes Like |Link to Comment
  • On April 8, Clearwire (CLWR) received an offer from a "strategic buyer" to buy spectrum leases "generally located in large markets that cover approximately 5 billion MHz-POP" for a price of $1B-$1.5B, less the present value of the leases. Clearwire, which made the disclosure in a new 14A, says it will evaluate the offer. The disclosure comes on a day when Bloomberg reports Dish Network, whose $3.30/share offer for Clearwire remains outstanding, approached Deutsche Telekom about possibly merging with T-Mobile USA. CLWR +2.5% AH to $3.34.  [View news story]
    jim,....ahem. $1.25B divided by 5B mhz-Pops is......$0.25/mhz-Pop. don't know how that affects your analysis and investment thesis.

    i wonder how the "present value" of the lease obligations will be calculated....at 15% discount rate or at 5% discout rate, and what the assumed lease renew rate is.

    The real interesting issue is that this is a "strategic" that is willing to deal with hold-up risk on the back-end of spectrum licensees so that rules out any of the big guys such as Verizon (plus in the context of this disclosure in the proxy statement, the other strategics such as AT&T and T-Mobile were already code-named as Party B and Party A in the proxy so it would have to be someone new). Furthermore it is someone that wants to get in cheap by taking some of the theoretically riskier spectrum (with built-in financing from the lease payments to deduct from value) but also a player that is interested primarily in the major markets. DirecTV maybe,...or who,...obviously someone willing to jump into the fray of a takeover controversy - which rules out most major large companies. Maybe Morgna O'Brien (the original founder of Fleet Call, nee Nextel) at Cyren Communications for his public safety play? I'm stumped.
    Apr 14, 2013. 10:12 AM | Likes Like |Link to Comment
  • Clearwire (CLWR) receives yet another alternative financing proposal from a money manager. Hedge fund Aurelius Capital is offering Clearwire $80M in convertible debt financing as a replacement for the funds it's receiving from Sprint (S). Last week, Crest Financial offered Clearwire $240M in convertible debt financing. Though taking Sprint's money and still officially supporting its $2.97/share buyout offer, Clearwire still hasn't made a final decision on Dish Network's $3.30/share bid.  [View news story]
    I agree that a squeeze-out merger under Delaware law requires "fair value" but that is for court to decide what meets fiduciary standard. But that same fiduciary standard resulted in an unanimous vote of the existing Clearwire board including the independent and disinterested directors that formed the Special Committee to support merger. I was simply addressing the poster's somewhat emotional sentiment that "Sprint will never be able to buy the minority shareholders' shares" and pointing out that is not necessarily the case. The poster was simply imposing his own assessment of value as the criteria for "fair value" -- the CLWR board had fairness opinions from each of Centerview and Evercore that would say otherwise. I'm not necessarily disagreeing with him on value, only whether a minority shareholder will have a say if he is the "last one standing"

    A CLWR shareholder is welcomed to his own opinion on fair value but as the proxy statement spells out in excruciating detail: (1) the CLWR business model of a carrier's carrier on a usage-based model is flawed as over 3 years CLWR wasn't able to attract any other customer to that model besides Sprint, (2) a large majority of major carriers did not have interest in CLWR's spectrum, and (3) of the ones with strategic interest, their preference was to cherry pick the spectrum (i.e. strip off spectrum assets) rather than BUY the company encumbered with the legacy network. Unfortunately the shareholders own the company behind the bondholders (who are sucking out $500M+ a year in debt service) and tower and spectrum leaseholders. From the proxy statement, you can review the analysis that selling off the spectrum, ostensibly at a higher $/mhz-pop still leaves a company with worse NPV given the debt and operating expense burden - - the point being that CLWR is worth more "dead" as an asset play than alive as an operating business because its existing operations is economically dilutive on value and whoever takes that on is taking the burden off of CLWR shareholders hands. So breaking apart the furniture in order to throw the pieces into the fireplace to keep the house warm for a few more nights doesn't solve the underlying issue. I own the bonds so I believe in the spectrum asset value (at least where the bonds are well covered) but the equity is a levered option that is NOT a play on asset value but rather it is a play on whether Son (not Sprint) will be a chump - - it is a speculative risk-arb bet on the tactical aspect of M&A under Delaware law (which at least you seem equipped to assess). There would be no way that Son would have rolled over like DT-whimp just did with Metro partly because Sprint already controls (in the form of negative control) CLWR, and party because DT was more desperate. As the proxy statement pointed out, Sprint stated it has "no interest or intention to sell" its CLWR equity stake, nor would it be willing to accommodate any changes in the governance that will dilute its control -- so this is the ultimate poison pill as no one else can buy into the company. Read the proxy carefully -- Sprint, and really Softbank, initially wanted to buy out ONLY the strategic investors -- it was CLWR's board and Stanton that convinced Sprint and Softbank to take out the whole company so that the public minority could tag along with the premium. If the minority shareholders vote it down (which seems likely given where the stock is currently trading), then Sprint/Softbank will end up exactly where they originally wanted, which was to only pay a premium to the strategic investors and to leave the public hanging until the trading lock-ups expire on November 28, 2013. This is all laid out in the proxy statement -- read it carefully as the intent of the parties are plainly spelled out. All I can say is be careful what you wish for. The best bet is to buy the bonds when CLWR decides to miss the June 1st coupon -- that's the asset play.
    Apr 13, 2013. 10:45 AM | 1 Like Like |Link to Comment
  • Clearwire (CLWR) receives yet another alternative financing proposal from a money manager. Hedge fund Aurelius Capital is offering Clearwire $80M in convertible debt financing as a replacement for the funds it's receiving from Sprint (S). Last week, Crest Financial offered Clearwire $240M in convertible debt financing. Though taking Sprint's money and still officially supporting its $2.97/share buyout offer, Clearwire still hasn't made a final decision on Dish Network's $3.30/share bid.  [View news story]
    They both had coverage requirements as part of the BRS/EBS licensing with EBS more forgiving. I do not recall as a condition of the merger that it imposed any greater construction commitment (that woudl require a rule-making) but Sprint-Nextel may have pitched it as now achieving the national scale to support an aggressive network roll-out and may have promissed not to come back and seek extensions. Frankly that had been a critique of both Sprint and Clearwire that they bet on WiMax -- the reality is that they had no other choice given the licensing terms under the BRS/EBS rulemaking.

    Even today, there are many markets where CLWR does not operate commercially but where it has constructed a single (or a couple) tower pinging out signals at relatively high power to meet the construction obligations of "pop coverage". That's standard practice in the industry in order to "hold" spectrum that had pop coverage construction obligations.

    Both parties saw the advantage of unifying the BRS/EBS spectrum and eliminating the prospect of duplicative overbuilds. However, your hypothesis is somewhat flawed -- no one really cared about the "minority" because they didn't exist (at least the public minority that you are thinking of). The real "minority" at formation of new Clearwire were the strategic investors such as Google, Intel, and the cable consortium, and Eagle River of course (McCaw), and what goveranace protections were required to induce their capital contributions. Of course those strategic "minority interests" have all thrown in the towel and either have already sold (at lower prices by the way) or otherwise have agreed to sell to Sprint as part of this deal. In raising public capital there were goverance protections (some temporary by the way such as the open market standstill) but those were put in place in contemplation of raising public equity capital as a "necessary" accomodation to address perceived capital market requirements.
    Apr 12, 2013. 10:03 AM | 1 Like Like |Link to Comment
  • Clearwire (CLWR) receives yet another alternative financing proposal from a money manager. Hedge fund Aurelius Capital is offering Clearwire $80M in convertible debt financing as a replacement for the funds it's receiving from Sprint (S). Last week, Crest Financial offered Clearwire $240M in convertible debt financing. Though taking Sprint's money and still officially supporting its $2.97/share buyout offer, Clearwire still hasn't made a final decision on Dish Network's $3.30/share bid.  [View news story]
    that is a little complicated. the BRS evolved from the original MDS/MMDS industry that used to consist the wireless cable television industry (also ITFS channels that eventually became EBS channels). MDS/MMDS licenses were originally site-licensed high power broadcast licenses with I believe a 35 mile protected service area. FCC Auction #6 in the mid-90's (see here for list of winners: http://fcc.us/10XjLrJ) resulted from a shift from single channel site licensing to geographic area licensing of the entire band, mimicing the FCC licensing model established by Nextel in the SMR band, by auctioning off the "white space" in a georgraphic area but otherwise encumbered by the pre-existing indiviudal MDS/MMDS site licenses. So an auction #6 winner could win the BTA geographic license but otherwise there may still be individual channel licensees within that geographic license area -- thus it resulted in "swiss cheese" spectrum in the band but generally encouraged site licensees to negotiate with the BTA auction winners. The winners in these auctions were largely the wireless cable companies such as PeoplesChoice TV, CAI Wireless, American Telecasting, Wireless One, TruVision, WTI, and even PacTel (the west coast RBOC that eventually merged with SBC) in the major markets and isolated pockets of independents who won smaller markets and fringe of major markets.

    The wireless cable industry pretty much all went bankrupt by the late 90's. Not surprising given its original technology using analog channels, largely limited to a 25-30 channel offering depnding on how many ITFS channels the operator was able to lease to supplement his MDS/MMDS channels, bu twhich then had to migrate to digital in order to get comepteive television offering. During the bankruptcy proceedings of these wireless cable operators, two surprising strategic players showed up and largely took over the biulk of the spectrum from the industry. Each of MCI and Sprint showed up and actually engaged in bidding wars to try to take over the spectrum in bankruptcy court. I forget who, but one of them trumped the other by offering to buy the equity and make the debt whole whereas the other had taken a control debt position by buying out other large creditors. In fact what's ironic was that a different Crest International, a private equity investment firm founded by Bill Sprague who previously headed up the media group at Smith Barney, actually was one of the major players in the creditor groups of those wireless cable bankruptcies (different then the current activist Crest Financial headed by Dee Osborne who is the largest minority shareholder at CLWR and the activist investor at CLWR fighitng the Sprint-CLWR deal). The result of that late 90's spectrum aggregation takeover battle was largely the consolidation of the major blocks of MDS/MMDS licensed spectrum and ITFS leased spectrum in major markets in the hands of Sprint and MCI. Basically MCI picked off the left and right coasts and Sprint had the major markets in between. Although there were pockets, such the southeast, which ended up being controlled by BellSouth who had taken over WirelessOne and Truvision. MCI, became a part of Worldcom, which subsequently went bankrupt but Nextel picked off MCI's MDS/MMDS spectrum from Worldcom but I cant remember whether out of bankrutpcy or beforehand.

    The MDS/MMDS spectrum became BRS in 2005 as part of a rulemaking that allowed the spectrum to be used at low power and 2-way communications (remember it used to be broadcast --that's why it is unpaired spectrum), and part of the MDS specturm became one side of the G-Block and H-Block PCS spectrum in 1.9ghz). For the most part, this spectrum had laid fallow until then awaiting both regulatory relief and development of technology that could use unpaired spectrum.

    In fact one of the compelling strategic logic of the Nextel - Sprint merger was the unification of this large block of nationwide BRS/EBS spectrum. In effect, Sprint Nextel had the bulk of this spectrum in all teh major markets -- basically the NFL/NBA/MLB cities. During the period between the late 90's and mid 2000's was when McCaw's henchman was buying up pockets of MMDS and ITFS spectrum in US and in Europe, and they ultimately acquired the vendor called Clearwire Technologies which was developing equipment (pre-WiMax) for the ITFS industry and who had raised a bunch of money with Goldman Sachs to roll up ITFS spectrum. McCaw acquired into Clearwire and ended up buying the BellSouth owned MMDS spectrum in the Southeast after AT&T decided it wasn't strategic. Clearwire engaged in a foot race to roll up ITFS spectrum as well as the independnet licensees that still had the original site licenses -- remember that the MDS/MMDS auctions only licensed the geographic markets' "white space" and were encumbereed by the 35-mile protected service areas of existing site licensees. Mini bidding wars broke out as Nextel began chasing the same mom and pop licensees (recalling its early days of rolling up the SMR licensees) once it figured out what McCaw was doing at Clearwire and was in a foot race to deploy its own Xohm mobiel broadband service using WiMax.

    So that is a very longwinded history to say that Sprint-Nextel had the bulk of the BRS spectrum in major markets when Sprint-Nextel and Clearwire merged their spectrum together in 2007, but Clearwire had some major markets (such as the Southeast) and it had "blocking" positions in some other markets where it was able to front run Nextel and Sprint in buying licenses from individual site licensees, and it also had large swaths of leased EBS spectrum (the old ITFS frequencies that Clearwire was developing pre-WiMax equipment to sell to these licensees before deciding rather than simply selling the dog food that it would instead buy the dogs) locked up.

    Bottom line, Sprint-Nextel brought to the party the bulk of the high value BRS spectrum with some supplemental EBS in major markets while Clearwire brought a storng portfolio of leased EBS spectrum along with isolated pockets of BRS positon in a few major makets and a lot of the secodn tier markets, but the old Clearwire also had strategic "hold-up" positions in some of the major markets and its EBS position offered a credible threat of a possible second WiMax network being constructed to compete against Xohm which made it sensible to combine the two. It is ironic that Sprint-Nextel has gone full circle and instead is re-buying the spectrum that itself had contributed to Clearwire.
    Apr 11, 2013. 12:07 AM | 2 Likes Like |Link to Comment
  • Is Apple Using Share Buybacks To Support Its Stock Price?  [View article]
    They have to buy the shares in the US. if they return foreign earned income to the US, it can be a deemed dividend and therefore subject to US tax. Same with borrowing from off-shore subsidiaries. In fact in order for AAPL to show the tax-rate that it accrues for (I think ETR around 25%) it needs to make so-called APB 23 certification of its intent to reinvest all its significant unremitted foreign source earnings indefinitely. There are strategies through inter-company loans where some of that cash may get back, but actions such as an off-shore subsidiary were to repurchase the parent company's shares is a deemed dividend and triggers US tax.

    So most folks jumping up and down about AAPL using the cash on its balance sheet to buy back shares dont fully get it that the cash is trapped off-shore unless Congress grants another repatriation holiday (it does that once every 20 years or so when enough corporate donations have been invested to influence Congress, and then the cycle begins again).

    Apr 10, 2013. 07:20 PM | Likes Like |Link to Comment
  • Clearwire (CLWR) receives yet another alternative financing proposal from a money manager. Hedge fund Aurelius Capital is offering Clearwire $80M in convertible debt financing as a replacement for the funds it's receiving from Sprint (S). Last week, Crest Financial offered Clearwire $240M in convertible debt financing. Though taking Sprint's money and still officially supporting its $2.97/share buyout offer, Clearwire still hasn't made a final decision on Dish Network's $3.30/share bid.  [View news story]
    which provision in the Softbank merger agreement do you see the conditions precendent to closing a requirement for the Clearwire merger -- short answer, you won't because such a condition doesnt exist.

    By the way, you can read the squeeze-out provisions of Delaware law, where CLWR is incorporated. "In the U.S. squeeze-outs are governed by State laws. E.g. 8 Delaware Code § 253 permits a parent corporation owning at least 90% of the stock of a subsidiary to merge with that subsidiary, and to pay off in cash the minority shareholders. The consent of the minority shareholders is not required."

    I agree that minority shareholders won't sell their shares for $2.97 (except the strategic insider investors who actually sit on the board who actually may know what CLWR strategic options are and who have agreed to sell outright at $2.97 provided that other minority shareholders had the same opportunity to sell). Where we may disagree is whether they then end up selling their shares for higher or lower afterwards. But time will tell.
    Apr 10, 2013. 04:32 PM | 2 Likes Like |Link to Comment
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