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Clearwire inks wholesale LTE deal with Leap

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Clearwire (NASDAQ:CLWR) said that Cricket provider Leap Wireless (NASDAQ:LEAP) signed a five-year wholesale agreement that will allow Leap to buy capacity on Clearwire's forthcoming TD-LTE network. Financial terms of the deal were not disclosed.

The deal is a feather in Clearwire's cap. Clearwire to date has been relying on majority owner Sprint Nextel (NYSE:S) as its largest wholesale customer. Sprint has already committed to taking advantage of Clearwire's LTE Advanced-ready network, which Clearwire will launch next year.

Moreover, Clearwire has lost customers including Comcast and Time Warner. The cable companies had resold Clearwire's WiMAX services, but recently inked a deal with Verizon Wireless (NYSE:VZ) to sell Verizon's offerings (as part of Verizon's purchase of their AWS spectrum).

Leap said that capacity from Clearwire's network will supplement its own LTE network buildout. Leap plans to deploy LTE across roughly two-thirds of its current network footprint over the next two to three years. It plans to cover around 25 million POPs with LTE by the end of 2012. Leap currently has a 3G CDMA roaming agreement with Sprint--the deal allows Leap to sell Cricket-branded service in areas where it does not operate a network, effectively making Leap a Sprint MVNO.

Clearwire could earn $50 million from its deal with Leap in 2013, according to a recent research note from Credit Suisse analysts, "assuming half of their [Leap's] 6.7MM average subs consume 0.5GB / month (roughly 25% of their total consumption) at $5 / GB and 6 months of usage."

Credit Suisse analysts said Clearwire's revenue from Leap could more than double in 2014. However, they cautioned that Clearwire's revenues from Leap would be contingent on which Leap markets Clearwire ends up supporting with its LTE network.

Clearwire intends to launch 5,000 TD-LTE cell sites by June 2013, and Clearwire CEO Erik Prusch has said that "not too terribly long" after the first 5,000 sites are online, Clearwire will expand that coverage to 8,000 sites. Clearwire hasn't yet disclosed the locations of those buidouts. Prusch has said that Clearwire won't be as focused on POPs covered with its TD-LTE network as it was with its WiMAX network. Instead, the carrier will instead focus on how much data traffic it can transmit across its network--presumably to get as much as wholesale revenue as possible.

Clearwire recently raised $1.1 billion to help fund its network buildout. However, the company said last month that despite the fresh funds, which will carry it through the end of 2012, it may have to raise substantial amounts of cash after that.

Leap appears to be replacing its deal with LightSquared for LTE with its new one with Clearwire. In March 2011 Leap announced an LTE roaming deal with LightSquared that would allow Leap to supplement its LTE coverage by roaming on LightSquared's planned network. However, LightSquared's planned buildout has become stuck in worries of the interference its planned network could cause to GPS receivers.

For more:
- see this release
- see this Dow Jones Newswires article (sub. req.)

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