Sprint Nextel Corp. has prolonged Clearwire's life with a new wholesale agreement that will provide the WiMax operator with at least US$1 billion in cash over 2011 and 2012.
Under the terms of the new agreement, Sprint, the 54 percent owner of Clearwire, will work with the struggling carrier to allow wholesale pricing for Sprint devices that operate on both Sprint's 3G network and Clearwire's 4G WiMax network.
For both carriers, the agreement allows them to bridge the gap between 3G and 4G WiMax networks, giving them both a more solid competitive position against AT&T Inc. and Verizon Wireless. Clearwire's WiMax network currently covers 71 markets and 120 million people in the U.S. This cash injection should allow the operator to continue to add new cities to its network.
The new agreement expands the "mutual re-wholesaling rights" so that both companies can resell the other's respective 3G and 4G network access to other parties. This should help open up new avenues for Clearwire, which added 1.4 million wholesale customers in the last quarter of 2010.
For Sprint, meanwhile, the deal will help it expand its multi-mode 3G and WiMax offerings. It is planning to expand offerings that bridge the networks for government and enterprise customers.
Sprint and Clearwire have been fighting over wholesale pricing since last year. For Sprint, this led to speculation that it may just buy Clearwire outright or hook up with new wholesale LTE upstart LightSquared. (See Sprint: Clearwire Buy Not in the Cards and Sprint's Hesse on LightSquared & Clearwire.)
Michael Nelson, analyst at Mizuho Securities USA Inc., expects that further network sharing agreements might still be on the cards for Sprint. "We continue to expect Sprint to enter into network sharing deals with Clearwire and LightSquared, which should offset some of the cost associated with Sprint's Network Vision plan," he writes in a research note Tuesday. (See MWC 2011: Sprint Plotting LTE in 2012 or 2013?.)
Clearwire, meanwhile, scrabbled round for more money and lost executives during the months that it and Sprint settled their differences. The operator also closed much of its retail presence in the interim. (See Sprint in 'Good' Talks With Clearwire on Financing , Clearwire Cuts as It Hunts for Funding and Clearwire CEO Morrow Resigns.)
Mizuho analyst Nelson notes that the deal is for services rendered and predicts that a further investment from Sprint is possible. "We believe Sprint may still make an additional equity investment into Clearwire as part of a network sharing agreement and view today's news as incrementally positive for Clearwire and Sprint," he writes.
â€” Dan Jones, Site Editor, Light Reading Mobile