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Sprint pledges Clearwire $1 billion wholesale fees
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By Sinead Carew
NEW YORK (Reuters) - Clearwire Corp and its majority owner Sprint Nextel Corp reached a new wholesale pricing deal that has Sprint paying at least $1 billion to Clearwire between this year and the end of next year.
But shares of...
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By Sinead Carew
NEW YORK |
Tue Apr 19, 2011 11:47am EDT
NEW YORK (Reuters) - Clearwire Corp and its majority owner Sprint Nextel Corp reached a new wholesale pricing deal that has Sprint paying at least $1 billion to Clearwire between this year and the end of next year.
But shares of Clearwire fell as much as 7 percent as investors were unimpressed with the pact, which ended months of disputes over how much Sprint pays to rent space on Clearwire's network to sell Sprint-branded high-speed wireless services.
The pair had signaled last month that a pricing deal was imminent. But some investors hoped it would come with a new equity investment from Sprint, according to at least one analyst. Sprint is a 54 percent owner of cash-strapped Clearwire.
Clearwire still needs billions of dollars in funding if it is to finish building its high-speed network.
Despite the new agreement, John Stanton, Clearwire's interim chief executive who is also chairman, said the company would have to keep looking for new ways to cut costs.
The disagreement with Sprint has been cutting in to Clearwire's revenue, so Stanton said the new commitment would help Clearwire fund operations and look at network expansion.
"That is a real positive in terms of our ability to fund our operating expenses and to be able to look at expansion," he told Reuters in an interview. "To me it's a bit of a template for further work."
Stanton would not give specifics about the company's network expansion plans except to say that they would involve another more advanced high-speed wireless technology as well as WiMax, Clearwire's current technology.
He said that Clearwire is also talking to Sprint about whether the companies would enter a network sharing agreement as part of an upgrade Sprint is planning for its own network.
Stanton added that Clearwire would go to cable partners including Comcast Corp and Time Warner Cable offering them similar terms to the Sprint deal.
The companies said on Tuesday that the agreement involves minimum payments from Sprint of $300 million in 2011, $550 million in 2012 and $175 million in prepayments for high-speed services to be used in 2011, 2012 and beyond.
This will mean a big increase to Clearwire's 2010 wholesale revenue of $50 million.
But investors wanted a clearer indication that this was a good deal for Clearwire as the companies did not reveal how much network usage the announced payments would cover, said Mizuho analyst Michael Nelson.
However, he noted it was premature to conclude that the deal was a sign that Sprint would not provide any more funding.
"I don't think it precludes Sprint from investing extra capital," Nelson said.
Clearwire shares pared some losses to trade down 3.1 percent at $5.60 late on Tuesday morning, off an earlier low at $5.35. Sprint shares were up 2 percent at $4.79.
(Reporting by Sinead Carew; editing by Gerald E. McCormick and Matthew Lewis)
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