Can Sprint leverage Clearwire without direct ownership?

editor's corner

Clearwire (NASDAQ:CLWR) was teetering on bankruptcy not long ago, and now it has announced it raised a total of $734 million from its recent stock offerings, which it will use to move ahead with the first phase of its planned TDD-LTE network.

Clearwire said it raised $402.5 million from its own public equity offerings over the past week, as well as $331.4 million via a private stock transaction with its majority owner Sprint Nextel (NYSE:S). Once fees to the underwriters of the offering are paid, Clearwire said it will net $715.5 million in fresh capital. Sprint's equity contribution is one part of $1.6 billion in conditional funding arrangements the two companies announced Dec. 1.

The new cash is more than the original $600 million threshold Clearwire said it needed to build out TDD-LTE across most of its mobile WiMAX footprint, which currently covers around 130 million POPs. In a statement, Clearwire CEO Erik Prusch said the "equity raise is a critical step for Clearwire to achieve its long-term business plan of creating the first wide-channel TDD-LTE 4G network in the U.S."

So Clearwire once again embarks on a new network rollout with Sprint. While Sprint again doesn't control the future Clearwire, it appears that it at least has put some safeguards in place so that it won't be totally beholden to the operator for its next-generation strategy. Sprint saw its competitive position in the 4G market ebb away as Clearwire slowed its rollout of WiMAX and Verizon Wireless (NYSE:VZ) and others forged ahead.

Of course that is why Sprint gave Clearwire the cold shoulder until the 11th hour when Clearwire threatened to skip a debt payment that would likely have put the company into bankruptcy.

In its LTE era, Sprint envisions using Clearwire's LTE buildout to augment its own FDD-LTE network, which Sprint expects to launch by mid-2012 using its 5X5 G Block of 1900 MHz PCS spectrum. Under the terms between Sprint and Clearwire, Sprint will pay Clearwire up to an additional $350 million in a series of pre-payments over a period of up to two years for LTE capacity if Clearwire achieves certain buildout targets and network specifications by June 2013.

Moreover, Sprint is relying on Clearwire to bolster its capacity. Sprint CFO Joseph Euteneuer said earlier this month at an investor conference that the specified buildout targets are going to be for hotspots across the country where both companies are seeing high demand.

 "We are asking them to build out initially to only a portion of what they cover," he said. "It is not the full network that they have to date."

Time will tell if Sprint can avoid taking full control of Clearwire.--Lynnette

P.S. Check out my feature about Towerstream’s latest Wi-Fi developments in Manhattan. It may not have signed carrier offload deals yet, but it is ramping up business in other unexpected areas. Check it out here.