Dish Bows Out of Battle with Sprint Over Clearwire

Getty Images

Dish Network Corp has bowed out of the battle for mobile service provider Clearwire Corp, marking the second major blow in less than a week against Dish chairman and founder Charlie Ergen and his plan to expand into wireless.

The decision, announced on Wednesday, officially put an end to a bidding war between Dish and Clearwire's majority owner Sprint Nextel Corp, and raised questions about what options Ergen has left in as he tries to expand beyond satellite TV services into the U.S. wireless market.

(Read More: Sprint Raises Clearwire Bid, Wins Key Investor Support)

Dish was driven out by Sprint's increased offer for Clearwire the week before. Sprint's offer of $5 per share trumped the $4.40 per share proposal from Dish and won the support of a key group of dissident Clearwire shareholders.

Analysts and investors have been questioning what kind of deal or partnership Ergen will look for next. Several analysts have said his best option could be to make a bid for No. 4 U.S. mobile provider T-Mobile US Inc, whose majority shareholder is Deutsche Telekom AG. Dish declined to comment on the prospects for a T-Mobile deal or on its future plans for wireless.

"It's an option," said a source familiar with the matter, referring to a T-Mobile US deal.

(Read More: Dish Abandons Sprint Bid for Now to Focus on Clearwire)

But the person, who asked not to be named, added that T-Mobile was not the only possible partner. The source noted that Ergen has always said he would pursue all of his options.

As recently as 2011, Deutsche Telekom tried to leave the U.S. market and some analysts saw the merger of T-Mobile USA with smaller U.S. company MetroPCS earlier this year as another possible step towards an ultimate exit.

Dish has already invested more than $3 billion to buy its own wireless airwaves, but it has no experience building wireless services or competing with large rivals such as Verizon Wireless and AT&T Inc.

As a result Ergen has said in the past he would prefer not to enter the market alone and would favor a partnership with an established operator.

(Read More: Dish Tops Rival Sprint's Bid For Clearwire)

"I don't think they've given up on wireless. They need to have access to one of the wireless operators' subscriber base," Brean Capital analyst Todd Mitchell said referring to Dish.

Sprint and Dish had been battling since January over Clearwire's valuable wireless airwaves and vying to buy out minority shareholders.

(Read More: Sprint Receives SoftBank Waiver to Consider Dish Offer)

On Friday last week, Dish also retreated from a larger battle to buy No. 3 U.S. mobile provider Sprint. Sprint shareholders voted on Tuesday in favor of a sweetened takeover offer from Japan's SoftBank's Corp.

Clearwire's minority shareholders will vote on the Sprint bid on July 8. Sprint had to raise its offer for Clearwire three times because of pressure from shareholders.

(Click here to track the company's stock in extended-hours trading.)