Sprint raises $4B in debt offering, hints at Clearwire funding

Sprint Nextel (NYSE:S) said it raised $4 billion in a debt offering on Friday and may use some of the proceeds to fund Clearwire (NASDAQ:CLWR). The new debt serves as a funding lifeline for Sprint, which said last month it needed to raise billions in fresh capital to fund the cost of Apple's (NASDAQ:AAPL) iPhone and its Network Vision network modernization plan.

In a statement, Sprint said it may use the new debt for "redemptions or service requirements of outstanding debt, network expansion and modernization and potential funding of Clearwire." All told, Sprint sold $3 billion in seven-year bonds at a yield of 9 percent, and $1 billion in 10-year bonds yielding 11.5 percent. The debt offering shows that Sprint can still access capital markets, but also shows investors are interested in Sprint's safest debt.

In addition to the $4 billion in debt, Sprint said on its third-quarter earnings call last week that it may seek between $1 billion and $3 billion in vendor financing to cover a portion of its Network Vision costs. Sprint CFO Joe Euteneuer reminded investors that Sprint had received offers for vendor financing when it was looking at bids in 2010 from vendors for Network Vision, which will allow Sprint to deploy LTE by mid-2012 via new mutli-modal base stations.

"But even though we approved vendor financing, we decided not to take it at that time," he said, according to a Seeking Alpha transcript of the carrier's third quarter earnings call. "So we're basically in the process of reapplying. We feel very good about the conversations to date. Where the ultimate number comes out, yet to see it's still too early on, but we've had good talks to date and we'll see where that goes." Alcatel-Lucent (NASDAQ:ALU), Ericsson (NASDAQ:ERIC) and Samsung are Sprint's vendors for the project. 

"We thought Sprint needed to raise $6 billion to fully fund $4 billion in maturities as well as an aggressive iPhone push and Network Vision," Credit Suisse analyst Jonathan Chaplin wrote in a research note. "Sprint will likely close the remaining gap with vendor financing. We expect the company to close this financing early in 1Q12. This largely eliminates the funding overhang, which we think has weighed heavily on the stock since the analyst day."

The hint about funding for Clearwire should brighten Clearwire's prospects. Clearwire, in which Sprint owns a 54 percent stake, has said it needs around $600 million to cover most of its mobile WiMAX footprint with a TDD-LTE deployment, and around $150 million to $300 million to maintain its legacy WiMAX network. Clearwire CEO Erik Prusch said "there remains a gap" between Clearwire and Sprint, but he said he hopes the companies will be able to reach an agreement on possible funding and network roaming. Sprint recently disclosed a non-binding agreement between Sprint and Clearwire that will cover the design of Clearwire's planned LTE network.

For more:
- see this release
- see this WSJ article (sub. req.)
- see this Bloomberg article
- see this Seeking Alpha transcript

Related Articles:
Clearwire CEO: 'There remains a gap' between Clearwire and Sprint
Report: Sprint close to extending Clearwire wholesale deal
Sprint inks deal with Clearwire, predicts up to $8B in value from iPhone
Sprint drops unlimited WiMAX data for mobile broadband plans

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