Sprint in 'Good' Talks With Clearwire on Financing

Sprint Corp. (NYSE: S) hasn't decided whether it will make further investments in its wholesale 4G partner Clearwire LLC (Nasdaq: CLWR), but the discussions are well underway. They've been expedited by rumors that Clearwire is abandoning its retail business to focus on wholesaling. (See Sprint Posts Q4.)

The Wall Street Journal reported early Thursday that Clearwire will eliminate its retail strategy with Clear to focus on its wholesale business as the company's funding dries up. This is a move that Sprint has been pressuring the company (which it is majority owner of) to make as it opted out of Clearwire's last round of funding.

If it proves true, it will be the best strategy for Clearwire, according to Mizuhu Security Analyst Michael Nelson. He wrote in a research note on the speculation:

    We believe Clearwire's shift away from retail likely indicates the two companies are working closer together towards a singular goal and may increase the potential for Sprint to invest additional capital in Clearwire. We continue to expect Sprint to invest additional capital in Clearwire once the companies resolve their dispute over wholesale contract payments and agree regarding usage of cash, which we believe is closer if Clearwire agrees to abandon its retail strategy.

Nelson said that he expects Clearwire to also continue to pursue its other funding options, including a strategic investment by T-Mobile US Inc. , selling excess spectrum and/or vendor financing. He believes most of Clearwire's subscribers will come through its wholesale channels.

Sprint, meanwhile, remained aloof about the possibilities on its fourth-quarter earnings call Thursday morning.

"We have good discussions and negotiations going on with Clearwire about resolving the differences in view between the companies," Sprint CEO Dan Hesse said on a call with investors. He acknowledged that this includes the "very public" issue of wholesale rates and wholesale pricing, but added "I wouldn't read anything more into that with respect to funding."

"We're not at that point where we've made any decisions in that regard moving forward," Hesse said. "We're pleased Clearwire was able to secure additional funding in the fourth quarter. If they need more, that will be a bridge we cross at that time." The carrier is still in the process of determining what to do for 4G deployments, Hesse added, and part of that is looking at WiMax versus Long Term Evolution (LTE). With its Network Vision program, Sprint has the ability and capability, as well as the spectrum, to do LTE should it decide to do so, he said. (See Sprint Ready to Leapfrog to Multi-Mode.) Sprint's Fourth Quarter
Sprint still rounded out 2010 with a subscriber loss, but it added 1.1 million total subscribers in the fourth quarter, including 58,000 postpaid users. That's the first time in over four years Sprint has had positive growth in postpaid. It expects to be net-add positive on postpaid this year, and Hesse says it's counting on a commitment to simplicity and value, a strong device lineup and continued improvements in customer experience to strengthen the brand.

"Today's a big well-known new device launch with a competitor, and we have actions in place to respond and mitigate that impact," Hesse said, alluding, of course, to the iPhone launch on Verizon Wireless , but not outlining what those actions will be. He admitted that he does expect some impact from Verizon's iPhone, but said Sprint's doing what it can to keep its subs in place.

— Sarah Reedy, Senior Reporter, Light Reading Mobile

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sarahthomas1011 12/5/2012 | 5:13:10 PM
re: Sprint in 'Good' Talks With Clearwire on Financing

That's going to be a big, expensive task for Clearwire to shut down all its retail outlets. I think it has 140. They popped up all over Chicago and had guys handing out info all over the place. Sad.

joset01 12/5/2012 | 5:13:10 PM
re: Sprint in 'Good' Talks With Clearwire on Financing

This definitely positions Sprint to use Clearwire spectrum for LTE. They've already done the trials. When do we think they'll make the switch?


I bet by year's end.

comtech3 12/5/2012 | 5:13:03 PM
re: Sprint in 'Good' Talks With Clearwire on Financing

I think Clear should let go of Sprint. Truth be told, Sprint needs Clear more than Clear needs Sprint for the simple reason the latter is scrambling to keep its subs from jumping ship,whereas Clear has the spectrum, multiple wireless devices that customers are enjoying,and home phone as well.What does Sprint have to offer Clear? If it is finances, Clear can get that elsewhere.Look at little Vonage, who had weathered the storm of Verizon suing them, is now a profitable entity.

The sooner Clear stays clear of Sprint, the better! Sprint is poorly run,and the boo boo they did by acquiring Nextel is the poison that will be their death knell.

spc_markl 12/5/2012 | 5:13:02 PM
re: Sprint in 'Good' Talks With Clearwire on Financing


Really the only reason Sprint bought Nextel was for its push-to-talk capability – hardly enough to justify the purchase.


WilliamofOccam 12/5/2012 | 5:13:00 PM
re: Sprint in 'Good' Talks With Clearwire on Financing

The WiMAX standard was pretty much frozen in 2005. If Clear could not deploy a nationwide 4G network in 6 years, they have only themseves to blame. In stark contrast the LTE standard was drafted first in 2009 and both Verizon and AT&T have planned large deployments by end of this year. To be fair, LTE has the benefit of being part of the 3GPP ecosystem but still Clear clearly lost the time to market advantage. 

krishanguru143 12/5/2012 | 5:13:00 PM
re: Sprint in 'Good' Talks With Clearwire on Financing

Sprint bought Nextel in 2004 and PTT was part of CDMA in 2000/2001 and used 1xRTT.  So why would SPrint buy Nextel for the PTT when they could have rolled it out on their network and it being a compatible technology with what they already offered.  How mane CDAM/iDEN phones were there?


The iDen PTT wa sfar superior to the CDMA PTT as it was quicker, but the fact still remains that Sprint could have done their own PTT and spent less than $35 billion doing it.  PTT was a fad back then and these days, who really uses it?  Mainly the same people that were customers of Nextel before Sprint bought them.

spc_markl 12/5/2012 | 5:12:56 PM
re: Sprint in 'Good' Talks With Clearwire on Financing


I am not saying that the reasoning was rational, but my contacts at Sprint have been adamant over the years -- that the main reason for getting Nextel was for the PTT capability.


krishanguru143 12/5/2012 | 5:12:55 PM
re: Sprint in 'Good' Talks With Clearwire on Financing

I guess they need a reason to justify the waste of money Nextel was.  The Nextel network was near capacity, no planned upgrades, Motorola wasn't look towards the future iDen services (like data), Motorola was the only handset provider and worst yet, Nextel on an incompatible band and couldn't be sued for anything else.  How Sprint ever thought they could integrate the two is beyond me.  They also had the heavy burden of NASCAR sponsorship that does nothing but eat marketing dollars.


The next time you talk to the adamant fold at Sprint, what was their integration plans?  Even today, Sprint has yet to integrate the two and they have deiced to kill Nextel as announced last year.

krishanguru143 12/5/2012 | 5:12:53 PM
re: Sprint in 'Good' Talks With Clearwire on Financing

LOL.  So even they couldn't see the reasoning behind it.  They got a customer base and that helped keep them ahead of T-Mobile, so that they had that going for them.  I think this merger will be used as a merger case in colleges of what not to do.  Kind of like the “New Coke” is used as a huge business blunder as well.  I’m sure Coke is relieved that they will lose that crown.


Sprint kept the CEO way too long; he wasn't delivering and they needed to replace him far sooner.  I wonder if they kept him if he would have went after T-Mobile.  Might as well as add yet another incompatible technology to the mix.

opticalwatcher 12/5/2012 | 5:12:53 PM
re: Sprint in 'Good' Talks With Clearwire on Financing

Push-to-talk was very popular (and still is) among construction people. Most of their communications was among themselves at a construction site, and the push-to-talk was more useful than most other cell phone features. They were loyal customers willing to pay extra for this feature.

Given the customer base for this technology, the NASCAR sponsership actually made a lot of sense.

What didn't make sense was trying to combine it. From a high-level upper management, ignore-the-nitty-gritty-detail point of view,  trying to implement PTT on the CDMA network and dripping IDEN made sense. But it turned out to be near impossible to port PTT in a way that satisfied these customers. It completely flopped and made many of their most loyal and high-paying customers leave.

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