Sprint Nextel (NYSE:S) said it no longer holds a majority economic stake in Clearwire (NASDAQ:CLWR), the first time in years its economic interest in the company has fallen below 50 percent.
Sprint spokesman Scott Sloat told FierceWireless that the company's "economic percentage dropped below 50 percent as a result of Clearwire issuing additional shares." He said that since Clearwire is in the midst of issuing new equity, he did not know Sprint's precise economic stake, but that Sprint's voting interest and economic stake are now aligned.
Clearwire declined to comment on Sprint's stake. "However, our relationship with them has not changed," Clearwire spokesman Mike DiGioia said. "We continue to work closely with them on the deployment of our LTE network. We value their position as our largest shareholder and largest wholesale partner."
Around this time in 2011 Sprint reduced its voting stake in Clearwire to below 50 percent in a bid to protect its balance sheet and clear the air with investors over potentially being held liable should Clearwire have defaulted on its debt obligations. Clearwire raised the prospect of a technical default last December but soon struck a new series of funding and network agreements with Sprint worth $1.6 billion over several years.
In early May Clearwire said it had agreed to sell up to $300 million in Class A Common Stock as part of an equity infusion, and contracted with financial services firm Cantor Fitzgerald to conduct the sale. According to a recent filing with the Securities and Exchange Commission, Sprint agreed to surrender 77,413,434 shares of Class B Common Stock of Clearwire to reduce its voting interest in Clearwire. "Sprint exercised its right to revoke the share surrender in exchange for the payment to Clearwire of $7,741.34," the filing stated. Clearwire said the Sprint sale was not related to the $300 million equity raise.
Sprint is still likely to remain Clearwire's largest single outside shareholder and is certainly its largest wholesale customer. Clearwire plans to deploy a TD-LTE overlay network on 5,000 cell sites by June 2013.
Google (NASDAQ:GOOG) in March revealed that it lost hundreds of millions of dollars on its investment in Clearwire. Google said it sold its stake in Clearwire--29.4 million shares in all--for $2.26 each, or $66.5 million. That represents a $433.5 million loss on Google's $500 million investment in Clearwire from 2008. Other initial Clearwire investors, such as Intel, have reported similar sales.
- see this Reuters article
- see this SEC filing
Clearwire to sell up to $300M in shares
Clearwire to launch 5K TD-LTE hotspots in 31 markets by June 2013
Clearwire raises $734M for TDD-LTE network
Sprint, Clearwire ink agreements on $1.6B in funding, LTE
Sprint reduces voting rights in Clearwire to avoid debt issues
Article updated June 11 with comment from Clearwire.