US mobile operator Sprint Nextel today took a decisive step to protect struggling WiMAX wholesaler Clearwire by agreeing to provide up to US$1.6bn in various forms of payments over the coming years.
The financing agreement comes at a pivotal moment for…
US mobile operator Sprint Nextel today took a decisive step to protect struggling WiMAX wholesaler Clearwire by agreeing to provide up to US$1.6bn in various forms of payments over the coming years.
The financing agreement comes at a pivotal moment for Clearwire, as it faced interest payments of US$237m today on its first-priority, second-priority and exchangeable notes that it was reportedly considering skipping.
Clearwire has now made these interest payments.
In a statement, the companies said that, subject to certain conditions, Sprint will pay Clearwire US$926m for access to Clearwire’s WiMAX network in 2012 and 2013. Sprint will have access to this WiMAX network until at least 2015.
Sprint is also moving to support Clearwire’s development of LTE services. Sprint will pay Clearwire up to US$350m in a series of prepayments for up to two years, provided that Clearwire meets build-out targets and network specifications by June 2013.
The companies added that Clearwire is planning to seek additional funding before it starts the build-out of its LTE Advanced-ready network.
Moreover, Sprint committed to giving additional equity funding to Clearwire in the event of an equity offering.
The companies said that, if Clearwire raises between US$400m and US$700m in new equity, then Sprint would participate on a pro rata basis in the offering with up to US$347m. This participation would be consistent with Sprint’s voting stake in Clearwire (49.6%).
Sprint holds a 54% equity stake in the WiMAX wholesaler.
Clearwire’s president and CEO, Erik Prusch, said that the announcement was “an important step towards meeting Clearwire’s key goals of extending our current 4G network arrangement, securing a commitment to our future LTE Advanced-ready network, and funding the business”.
Clearwire made an operating loss of almost US$400m in its Q3 results, compared to a loss of almost US$520m for the same period last year.
In November, Sprint made a US$4bn debt offering. It said at the time that it would use the net proceeds for general corporate purposes, including “among other things, redemptions or service requirements of outstanding debt, network expansion and modernization and potential funding of Clearwire Corporation, and its subsidiary, Clearwire Communications, LLC”.