Clearwire May Be in Trouble – And Sprint Frankly May Not Give a Damn

Investors are growing increasingly nervous that Clearwire not only won’t be able to raise enough cash to both function and continue their network build out, but that they won’t be able to raise enough cash to make their promised switch to LTE technology. Last week Clearwire stated they’d need an additional $600 million to incorporate “LTE Advanced-ready” technology into the company’s 4G network, though the real world total needed could be double that. As Bloomberg correctly notes, Sprint has been preparing for a Clearwire fiscal implosion for some time, in June cutting its voting stake to 49.8 percent from 53.7 percent to limit financial liability. Investors noticed:

The fall in Clearwire s fixed-income securities reflects declining bondholder confidence that Sprint has a long-term commitment to the company, Dave Novosel, an analyst with Gimme Credit LLC, said in a telephone interview from Chicago. “With Sprint s LTE agreement with LightSquared, they re thinking that maybe Sprint does not need Clearwire like it did before, Novosel said. In the near term it needs Clearwire, but longer term, Sprint could move away.”

Unmentioned by Bloomberg is the fact that Sprint has also been working hard on their own LTE network (plans for which should be announced this fall), which includes a $4-$5 billion base station retrofit paving the way for LTE and a more efficient network. They also just struck a massive fifteen year spectrum and network resource sharing agreement with LightSquared. Sprint may just be waiting for Clearwire to implode, at which point Sprint will simply swoop in an gobble up Clearwire’s assets on the cheap. Granted, neither Sprint or LightSquared are on particularly rock-solid financial footing either, and face serious issues in a market where AT&T and Verizon will soon have an 80% market share.
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