Hesse: Sprint will walk away from Clearwire if wholesale pricing dispute isn't resolved

Sprint Nextel (NYSE:S) CEO Dan Hesse told the Wall Street Journal that the company expects to resolve its ongoing wholesale pricing dispute with Clearwire (NASDAQ:CLWR), but said the company is prepared to go its own way if an agreement isn't reached.

In late October, Sprint initiated an arbitration process with Clearwire over a dispute between the two companies regarding the money Sprint pays Clearwire for Sprint's WiMAX-capable smartphones, the HTC Evo 4G and the Samsung Epic 4G.

According to Clearwire, several hundred thousand Evo and Epic subscribers currently use their phones outside of Clearwire's coverage area. Clearwire argues that its wholesale agreement with Sprint, which holds a 54-percent stake in Clearwire, calls for Sprint to make monthly payments to Clearwire for those devices, despite the fact that the phones aren't connecting to Clearwire's WiMAX network. Sprint appears to disagree, and has taken Clearwire to arbitration to hammer out the details.

If Clearwire is unsuccessful in its negotiations with Sprint, the WiMAX company could lose out on millions of dollars every month in revenues--a potentially serious issue as Clearwire struggles to fund its ongoing operations, Clearwire has said.

"Our Plan A is together with Clearwire, but we do have a Plan B," Hesse told the publication. "If we don't reach agreement, we will go and do our own thing."

In addition, Sprint has made it clear the company won't invest further in Clearwire until the wholesale pricing dispute is settled.

In its fourth-quarter earnings conference call last month, Clearwire said it was close to resolving its dispute with Sprint and that the issue needed to be resolved before it could receive additional funding. The WiMAX operator said it expects to announce a decision on new funding in the second quarter.

Clearwire continues to explore a number of funding options, including adding new strategic equity partners and a limited sale of spectrum. Clearwire said it received offers to purchase varying amounts of spectrum from multiple parties, some of whom also expressed interest in exploring other strategic transactions (T-Mobile USA has been named in the past as one of those parties).

During the company's earnings conference call, Clearwire CEO Bill Morrow said work on Clearwire's funding options will ramp up once the wholesale deal with Sprint is worked out. He reiterated that Clearwire's preference is to secure an additional strategic investor.

For more:
- see this Wall Street Journal article (sub. req.)

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