Sprint Nextel (NYSE:S) declined to purchase fresh debt from Clearwire (NASDAQ:CLWR), a move that eliminates a possible source of funding for the WiMAX operator.
Sprint, which holds a 54 percent stake in Clearwire, declined to purchase up to $760 million in Clearwire's convertible debt. "Sprint's decision was expected and despite short-term challenges, we continue to maintain a productive relationship with them and our other strategic investors," Clearwire spokesman Mike DiGioia told Bloomberg.
Last month Sprint said it has no plans to acquire Clearwire. Relations between the two companies have been strained because of a dispute over wholesale payments related to WiMAX smartphones that Sprint sells, as well as over Clearwire's decision to pursue a direct-to-consumer retail strategy.
Clearwire raised more than $1.33 billion in December via a debt offering, but the company needs additional funds to operate and expand its business. To raise additional money, Clearwire is looking to add a new equity investment partner or possibly sell off some of its unneeded spectrum. Clearwire CFO Erik Prusch said in early December that the company hoped to have one or both of those funding issues resolved by the first quarter of this year.
Clearwire's mobile WiMAX network is now live in 71 markets; the company launched service in San Francisco Dec. 28.
The decision by Sprint to pass on the debt purchase comes days after Clearwire founder and wireless industry pioneer Craig McCaw resigned as chairman of the company. Clearwire said McCaw's resignation did not reflect any disagreement with the company.
In December, Sprint said it struck a new deal with Clearwire that allowed Sprint to reduce its voting rights below 50 percent without reducing its economic stake in Clearwire. The move allows Sprint to avoid any liquidity risks if Clearwire defaults on its debt.
- see this Bloomberg article
- see this Reuters article
Craig McCaw resigns as Clearwire chairman
Sprint: We have no plans to buy out Clearwire
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