Sprint's network plan provides Clearwire with an LTE escape hatch

Phil GoldsteinSprint Nextel (NYSE:S) executives have emphasized that one of the key benefits of the carrier's multi-year, multi-billion-dollar network modernization project is technological flexibility. What Sprint executives aren't saying as much about is how the project will impact Sprint's relationship with Clearwire (NASDAQ:CLWR) and its 4G strategy.

Bob Azzi, Sprint's senior vice president of networks, said that if Sprint decides to move to LTE, its new multi-mode base stations will give it the flexibility to easily make that transition. Sprint would have to install a radio head on its cell sites for LTE spectrum, add in a new baseband card to the base station and then perform a software update.

But how does a Sprint move to LTE benefit Clearwire?

During a conference call with analysts to discuss the project, Steve Elfman, Sprint's president of networks and wholesale, said the project provides "a good opportunity for the two companies [Sprint and Clearwire] to network share if we so choose." Clearwire already shares a "significant number" of sites with Sprint, Clearwire CFO Erik Prusch said last week.

If Clearwire decides to move from WiMAX to LTE, it could take advantage of new Sprint infrastructure that is easily upgradeable to LTE, which could cut down significantly on Clearwire's capital expenditures and long-term operational costs, depending upon how much infrastructure it shares with Sprint. Indeed, with LTE emerging as the dominant 4G path in the United States, such a move seems more inevitable than speculative.

Meanwhile, Clearwire's funding is still up in the air. The company is looking to secure $1.33 billion in debt financing and could sell up to $2 billion in spectrum. Given the uncertainty of its finances, taking advantage of Sprint's new base stations seems like a smart business decision.

If Sprint does decide next year or the year after to move to LTE, Clearwire's spectrum combined with Sprint's new base stations could give the cash-strapped Clearwire the boost it needs. --Phil