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BREAKING NEWS: Clearwire announces funding deal with Sprint

S4GRU

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by Robert Herron
Sprint 4G Rollout Updates
Thursday, December 1, 2011 - 8:20 AM MST

 

This morning Clearwire has come out with a Press Release stating that they have come to an agreement with Sprint on new funding. Up to $1.6 Billion in additional funding in total. This is significantly more than analysts were anticipating if Sprint were to come to the rescue.

The deal, as reported from Clearwire on Thursday morning, would include keeping the existing WiMax network operating through 2015. Good news for WiMax device holders living in WiMax coverage areas. It also involves a path forward partnership between Sprint and Clearwire on a new 4G LTE network on Clearwire's EBS/BRS spectrum (2500-2600MHz). This is seen by analysts and Wall Street as necessary for Sprint's future spectrum needs for it's upcoming LTE network.

In the short term, this will allow Clearwire to pay it's $237 Million debt payment that is due today. It always had the liquidity available to make the payment, but Clearwire was weighing options of non-payment to help keep it's cash reserves up. This new development should ease these concerns. And as Clearwire considers other means to raise cash, making this payment will help to those ends.

Sprint is offering up to $926 Million to Clearwire for it's continued use of the WiMax network for it's 4G through 2012 and then will be transitioning to a usage based model for payment of services. Past deals involved flat per user fees. An extended deal will ensure that customers who purchase new WiMax devices will have access to WiMax networks at least through the completion of their two year contracts. The deal also allows for Sprint to wholesale Clearwire's network to it's MVNO and Enterprise customers.

One of the key aspects that this blog is most interested in relates to Network Vision and the LTE network build out. This deal will help to better align Clearwire's spectrum into Network Vision when and where additional LTE capacity is needed and Sprint's owned spectrum will not provide enough capacity. This will ensure a better 4G LTE experience for many years to come and will help to squelch frequent concerns from the blogosphere and Wall Street about Sprint's 4G LTE network capacity that would likely result from only using Sprint owned spectrum.

However, in the press release, it appears to be saying that Sprint will not release devices until 2013 that support Clearwire's TDD-LTE network. This likely means that the first LTE devices being released in 2012 will not support these additional frequencies. This may not be well received by LTE customers. And could result in many people delaying the purchase of LTE devices until devices are released that support all Sprint LTE frequencies.

Sprint will not be providing funds for Clearwire's LTE network build out at this point. Sprint will provide up to $350 Million in Prepayments to Clearwire for LTE service if Clearwire manages to get funding for their LTE network on their own and meet build out time line requirements. Sprint and Clearwire will also start with a usage based fee model with LTE from day one. Additionally, starting in 2013, Sprint will work with Clearwire to add LTE to it's Network Vision towers where additional capacity is needed. These locations could even be in markets where Clearwire doesn't even offer service.

Sprint may even offer additional equity funding to Clearwire. But only if Clearwire can secure other equity funding from other sources. Because Sprint does not want to increase the amount of equity it has in Clearwire greater than 49.6%. So additional funding from other sources would involve more monies from Sprint at a rate to maintain that pro rata basis.

 

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Updated at 9:05 AM MST with more details. Edited at 9:18 AM MST with readability corrections.

 

Press Release: http://corporate.cle...eleaseID=629282



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