Two feuding siblings in the wireless sector are talking to each other again.
Sprint CEO Dan Hesse disclosed in a conference call that his company has reached a non-binding cooperation agreement with Clearwire for fourth generation network capacity using LTE technology. Hesse said that Clearwire’s wireless spectrum is needed to supplement Sprint’s 4G LTE network, which it plans to roll out next year.
“It was necessary to reach this agreement in order to clear the way to begin negotiations of commercial terms under which Sprint may utilize and pay for access to the Clearwire LTE network,” said Hesse.
The Sprint CEO said that talks with Clearwire were ongoing and no financial terms would be disclosed until a final agreement is reached. He said the two companies need to work out technical issues that would allow wireless calls to make a “seamless handoff” from Sprint spectrum to Clearwire spectrum. Hess said they were making “very good progress” in resolving technical issues.
Clearwire (Nasdaq: CLWR) shares have plummeted this year, in part because of fears that Sprint Nextel (NYSE: S) would offer little or no help in building out Clearwire’s LTE network. The two companies have a complex relationship. Sprint owns over half of Clearwire’s shares, while Clearwire owns valuable spectrum that it leases to Sprint and other wireless carriers.
Despite its strong ties to Clearwire, Sprint earlier this month said it would stop offering phones and devices that are compatible with Clearwire’s WiMax network. Sprint has also pursued a wholesale partnership with LightSquared, a startup wireless company that has the backing of billionaire Philip Falcone and his hedge fund, Harbinger Capital. The $9 billion LightSquared deal hinges on the company working out GPS interference issues with the Federal Communications Commission.
Hesse said Sprint was not backing away from its deal with Lightsquared, but pointed out that LightSquared only offers Sprint an additional year of LTE capacity, while a deal with Clearwire would mean multiple years. “I’ll leave it add that,” said Hesse.
Wells Fargo analyst Jennifer Fritzsche, who rates both Sprint and Clearwire stock “outperform,” believes the cooperation agreement between the two companies signals a “positive directional change” in their relationship that could lay the foundation for a long term LTE agreement.
Clearwire could certainly use the revenue. It’s $5 billion in debt and needs to raise another $600 million to deploy its new LTE network.
Sprint has its own financial challenges. The company needs to raise $7 billion to pay for new handsets and a network upgrade. Sprint posted its 16th straight quarterly loss.