Members of Sprint Nextel's (NYSE:S) board expect the carrier to make a "substantial" new investment in Clearwire (NASDAQ:CLWR), according to a report in the Wall Street Journal, a move that would help clear up uncertainty over Clearwire's funding future.
The report, which cited unnamed sources familiar with the matter, cautioned that no final decision on funding Clearwire has been made. One source told the Journal that the exact size and timing of the investment will depend on how quickly Clearwire can restructure its operations. The funding would help Clearwire into 2013. Sprint is expected to detail more of its 4G strategy at an investor meeting Oct. 7.
Sprint spokesman Scott Sloat noted to FierceWireless that under a revised wholesale agreement the companies announced in April, Sprint has committed to paying Clearwire $1 billion through the end of 2012. He declined to comment beyond that.
Clearwire has insisted it has enough liquidity to fund its business for another year. However, the company noted last week that it will need an additional $600 million to fund its transition to TDD-LTE and an extra $150 million to $300 million to maintain its existing mobile WiMAX business.
The funding uncertainty comes as the cost for Sprint to borrow has increased, with investors demanding higher rates for new Sprint debt, something Sprint CFO Joe Eueteneur acknowledged to the Journal. However, he said Sprint is confident in its finances, noting that Sprint has $4 billion in cash on its balance sheet and expects to generate positive free cash flow for 2011. "The company is in control of its destiny," he said. "We get calls every day asking us when we are going to access the markets."
- see this WSJ article (sub. req.)
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