US telco Sprint Nextel has said that it is not planning to acquire US WiMAX operator Clearwire.
Sprint made the announcement in a statement on the closing of Clearwire’s debt offering of over US$1.1bn. “Sprint continues to hold discussions with Clearwire…
US telco Sprint Nextel has said that it is not planning to acquire US WiMAX operator Clearwire.
Sprint made the announcement in a statement on the closing of Clearwire’s debt offering of over US$1.1bn. “Sprint continues to hold discussions with Clearwire regarding further investment in the company but has no plans at present to acquire Clearwire,” it stated.
Sprint Nextel holds a 51% stake in Clearwire. It also has pre-emptive rights to acquire up to its pro-rata share of the US$650m exchangeable notes offered by Clearwire. Its right to acquire these notes expires on 2 January 2011.
Clearwire, Sprint and other parties to the Clearwire Equityholders’ Agreement have amended the agreement to allow Sprint unilaterally to surrender its voting securities and to reduce its voting security percentage below 50%.
Clearwire completed its debt offering on 9 December. This offering was divided into three sections.
Firstly, there was an offering of US$175m in 12% first-lien senior secured notes, due in 2015, for an issue price of 105.182 plus accrued interest from 1 December.
There was also an offering of US$500m in 12% second-lien secured notes, due in 2017, for an issue price of 100 plus accrued interest from 9 December.
The third part was an offering of US$650m of exchangeable notes, due in 2040, for an issue price of 100 plus accrued interest from 8 December.
Moody’s yesterday assigned definitive ratings to Clearwire’s debt offering.
It gave the US$175m first-priority notes a rating of B2, while the US$500m of second-lien notes were given a Caa2 rating.
Moody’s also assigned a B2 rating to Clearwire’s existing US$2.52bn senior secured first lien notes, due in 2015.
In a statement, Moody’s said that Clearwire’s Caa1 corporate family rating, and its default rating of Caa2, would “remain under review with direction because of the fluid situation regarding the Company’s ability to fund the full build-out of its business plan and its relationship with its key strategic partner.”
That key strategic partner is Sprint Nextel.
The assumption is that Clearwire will be using the proceeds to finance the expansion of its WiMAX network in the US, which has led to it registering increasing losses.
WiMAX is an alternative 4G technology to LTE, but so far the latter has been the preferred option for US operators, partly because it is the cheaper service to roll out.
Clearwire reported a net loss of US$139.4m in Q3 2010, compared to a loss of US$82.4mfor the equivalent period last year.
Moody’s described Clearwire’s liquidity as “good”, stating that it would finish 2010 with approximately US$2bn in cash.
It made clear that it saw the relationship between Sprint and Clearwire as being crucial for the latter’s success.
“If the dispute with Sprint lingers and Clearwire does not obtain additional funding, its operating and financial profile may well come under significant pressure, which could have negative implications for the rating.
“If Sprint and Clearwire quickly come to an agreement and Clearwire receives the funding that it needs to continue rapid expansion of 4G coverage, Clearwire’s earnings and financial profile may well come under significant pressure, which could have negative implications for the rating.”
Moody’s explained that it viewed Clearwire’s debt issuance as a means for the company “to prolong its existence and operate within its year-end 2010 footprint, while strategic direction from Sprint and other key investors is further negotiated.”
