Clearwire & LightSquared: Stymied by Borrowing Woes?
Financial analysts and the business press are already questioning where Clearwire LLC (Nasdaq: CLWR) will get the $600 million it says it needs for an Long Term Evolution (LTE) overlay on parts of its existing WiMax network.
Standard & Poor’s revised its outlook on Clearwire from "developing" to "negative" last week. It puts the Clearwire corporate credit rating at "CCC+" now and says it is unlikely to raise the rating on Clearwire to "B-" over the next year given the operator's need for capital.
Forbes reports that Merrill Lynch & Co. Inc. analyst Michael Funk notes that the company could run out of money by mid-2012. Among Clearwire's funding options are equity and debt funding. "Current market conditions and Clearwire’s cash flow profile limit access to the equity capital market," Funk writes. While secured debt requires more equity funding.
Meanwhile, Funk thinks that Sprint's LTE deal with LightSquared makes Sprint less likely to fund Clearwire in the near future.
Which, to me, begs the question, is LightSquared going to be that much better off in this environment trying to raise the capital it needs to pay Sprint to deploy its LTE network?
First, the GPS issue is currently still hanging over LightSquared right now. Second, it will still take Sprint around three years to deploy LTE on its network. So, LightSquared won't be able to start adding wholesale subscribers until some time in 2012 and won't have nationwide coverage until around 2015.
LightSquared may be the newest wholesale mobile broadband provider, but, with its own deployment challenges and the downturn in the stock market, there will definitely be some bumps in the road ahead for the operator.
— Dan Jones, Site Editor, Light Reading Mobile