Sprint: We face problems if Clearwire defaults on loans

Sprint Nextel (NYSE:S) said it faces problems if Clearwire (NASDAQ:CLWR) defaults on its loan agreements. In addition, Clearwire stated in a Securities and Exchange commission that its continual losses and uncertainty over financing raises red flags about the WiMAX operator's ability to continue operating.

Last week Clearwire announced it would take several measures to conserve cash as it seeks to secure new funding. These measures include substantially decreasing its sales and marketing efforts, delaying smartphone launches, suspending operations in new markets and cutting 15 percent of its workers. Clearwire has been searching for additional funding, and it appears Sprint, which owns 54 percent of the company, along with other investors such as Time Warner Cable and Comcast, aren't willing to put more money into Clearwire.

Sprint disclosed that Clearwire could be considered a subsidiary, and if a subsidiary breaches its covenants, the parent's business, financial condition and results, and liquidity could be affected. BTIG Research analyst Walter Piecyk said that a default at Clearwire could trigger a default on Sprint's bonds.

But Sprint said in the filing that the company could take action to eliminate the potential for Clearwire to be considered a subsidiary, including the possibility of selling the stake. Sprint also maintained its expectation that it would remain in compliance with its covenant agreements through at least the end of 2011. Clearwire has indicated it is looking at a variety of ways to gain funding, including looking for new investors, bringing on more debt and selling of spectrum.

Meanwhile, Clearwire  posted record subscriber and revenue growth in the third quarter and its network now covers 100 million POPs. Clearwire also said it now expects to end the year with 4 million total subscribers, double what it had predicted at the beginning of the year. The operator ended the third quarter with 2.84 million total subscribers, including 1.01 million retail subscribers and 1.83 million wholesale subscribers. The company said this is the first time the number of subscribers in its wholesale subscriber base surpassed that of its retail business.

Clearwire reported a wider net loss of $139.4 million, compared with $82.4 million it had in the year-ago period. 

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

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