Clearwire: Playing Chicken?

Have you ever seen a 1971 film called Duel?

It was Steven Spielberg's directorial debut and involves an unseen trucker taking on a hapless driver in what amounts to a scary, cross-country game of chicken. It's a fun watch if you haven't seen it before.

It also seems to me to be somewhat analogous to Clearwire LLC (Nasdaq: CLWR)'s relationship with its far larger majority owner, Sprint Corp. (NYSE: S), right now. Only in this over-stretched analogy it is not entirely clear to me which party is trying to bump the other off the road.

Case in point, Clearwire is due to make a debt payment of around $235 million on Thursday. As a research note from UBS Investment Bank points out, it easily has the cash on hand to make the payment. Yet, earlier this month, CEO Eric Prusch told The Wall Street Journal that Clearwire might skip the payment because it "would be a significant drain of our cash."

Missing the payment would put the company in default. "We believe going into default is not a step the company wants to take, as even if the default is cured during the [30-day] grace period, the act of defaulting would make it very difficult to secure vendor financing for an LTE build without some kind of concurrent restructuring," the UBS note says.

Yet Clearwire is taking it right down to the wire. Why? I can only speculate that it is some kind of "who blinks first" game with Sprint. Clearwire has made it blatantly clear that it is looking for additional funding from Sprint for its LTE deployment. (See Clearwire Still Looks to Sprint for Funding.)

Seems like a possibly risky power-play, no? I'm sure I'm not seeing all the angles here, and there's probably more to it. Still, with the information I have at hand, that's how it seems.

Let's hope there's no smoking wreck on the road at the end of this particular movie.

— Dan Jones, Site Editor, Light Reading Mobile

Gabriel Brown 12/5/2012 | 4:47:27 PM
re: Clearwire: Playing Chicken?

Can you get LTE in your city? VZW LTE has pretty good coverage in many places.

timkridel 12/5/2012 | 4:47:27 PM
re: Clearwire: Playing Chicken?

Unfortunately not yet. Probably by mid-2012.

timkridel 12/5/2012 | 4:47:30 PM
re: Clearwire: Playing Chicken?

I've got Clearwire via my Sprint EVO. In my experience, coverage is iffy at best. For example, when I'm in cities where the network is mature, it's much less dependable than cellular. I can have a good signal and then walk 10 feet and have zilch.

My main gripe is that the buildout has stopped. As an analyst and journalist, I understand why. But as a customer, I'm pissed because I pay the same as people who live in cities where Clearwire has extensive service. My city covers 60 square miles, and as far as I can tell, Clearwire has only one site. It launched in June -- http://columbiabusinesstimes.c... -- and barely covers a tenth of the city, if that.

My city is one of the few that has two WiMAX operators -- http://columbiabusinesstimes.c... -- so I can always hope that the other one will strike a roaming agreement with Clearwire before my Sprint contract expires. But I'm not holding my breath.

cnwedit 12/5/2012 | 4:47:31 PM
re: Clearwire: Playing Chicken?

Where it works, it's great. I use it a lot in NYC, Vegas and D.C.

I have had some coverage problems - I actually wrote about that here: http://www.lightreading.com/blog.asp?doc_id=213497

As for recommending it, if you live in a city where Clearwire has been in operation for a while, such as Chicago, I think it's a good bet. The only problem is determining whether or not you live in a "dead spot" before making a commitment, because they definitely exist.

One footnote to the story I wrote about not having connectivity at my mom's: I returned to visit her in November and was pleasantly surprised to discover Clearwire now works beautifully there.

Gabriel Brown 12/5/2012 | 4:47:31 PM
re: Clearwire: Playing Chicken?

Hi Carol -- what do you think of the Clearwire service? Any good? Would you recommend it?

cnwedit 12/5/2012 | 4:47:32 PM
re: Clearwire: Playing Chicken?

As I sit here in my Manhattan hotel room, using my Clearwire modem, I wonder how this game of chicken plays out for those who've invested in equipment and paid monthly fees to Clearwire.

When American Airlines declares bankruptcy, the planes still fly. When Clearwire skips debt payments, do the same rules apply?

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