Clearwire Pushing For New Sprint Agreement by Month’s End
Clearwire is pushing for a new agreement with Sprint by month’s end, in advance of a $236.9 million interest payment on its debt due Dec. 1, analysts said Tuesday at the Wells Fargo investor conference in New York. Clearwire CEO Erik Prusch declined to comment on the timing for completing an agreement with Sprint, but discussions appear to have warmed since Sprint said in early October that it would make its own 4G network and stop selling phones that would work with Clearwire’s, analysts said. Since then, Clearwire and Sprint have signed a memorandum of understanding on technical specs for LTE, agreeing to work together on an “eco-system” and site selection, Prusch said.
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WiMAX, LTE and financing are the “critical elements” of discussions with Sprint and Clearwire is “working like hell to get it done,” Prusch said. Under agreements signed in April, Sprint is required to pay Clearwire minimums for its services of $300 million this year and $550 million in 2012, Clearwire said. Sprint owns 48 percent of Clearwire and has made a series of capital injections in the company. It also has sold 4G phones, including HTC’s Evo, that are compatible with Clearwire’s network. With the interest payment due on Dec. 1, Clearwire had $711 million cash as of Sept. 30, company officials said.
Clearwire is seeking to raise additional funding through a combination of equity, debt and vendor financing, Prusch said. Clearwire proposed to overlay its network with TD-LTE with a goal of launching the service starting in late 2012, Prusch said. It will cost about $600 million to install LTE, about half of which is expected to come from vender financing, Prusch said. While Clearwire announced an agreement with China Mobile in September, it’s unlikely to include an equity investment in the company, but rather focus of TD-LTE devices and chipsets, Prusch said. China Mobile also will likely provide support for Clearwire’s getting vendor financing, Prusch said.
For TD-LTE, Clearwire will focus service on its major markets in metro areas, Prusch said. The 4G service is available in 77 markets in the U.S., including 12 in Texas and eight in California. It has tested LTE in Phoenix, delivering up to 90 Mbps downloads on a lightly loaded network. Clearwire ended Q3 with 9.5 million subscribers, who pay monthly fees starting at $50 for download speeds that typically range three to six Mbps. Clearwire had 8.2 million wholesale subscribers Sept. 30, most of them through Sprint, which accounted for 40 percent of the company’s $332.1 million in Q3 revenue. It also has 1.3 million retail customers, largely through Best Buy, Prusch said. Clearwire has 40,000 retail subscribers in international markets, largely in Seville and Malaga, Spain. Clearwire has put operations in Brussels and Ghent, Belgium; Germany and Spain up for sale and expects to complete an agreement by Q2 2012, the company has said.
Whether Clearwire will eventually gain agreements with Verizon or AT&T remains to be seen, analysts said. But as the number of smartphones in use increases and the amount of available bandwidth shrinks, Clearwire is confident its 2.5-2.6 GHz spectrum will come into play, Prusch said. “It’s going to take some time, but you can self split your way until you run out of spectrum,” Prusch said. Verizon and AT&T have been supporting FD-LTE technology, which uses two channels -- one for speaking and one for listening -- and is expected to hold a modest cost advantage over TD-LTE for at least the next two years, analysts said. TD-LTE uses a single bi-directional channel.
While Comcast and Time Warner own 9.7 percent and 5.1 percent stakes in Clearwire, the cable operators have yet to make a major push with the technology. Comcast is selling some Clearwire modems, but has no immediate plans to expand beyond that, said Neil Smit, executive vice president and head of cable operations at Comcast.