Sprint and Clearwire Nearing Deal

Sprint and Clearwire Nearing Deal

Sprint and Clearwire are in talks. Not engaged but maybe serious dating.

Sprint and Clearwire are not only talking again. They may be going out on an extended date.

Bloomberg reports that the two wireless carriers are “near an agreement” to extend their existing network contract for another three to five years. According to Bloomberg, a new wholesale agreement would allow Sprint to use Clearwire spectrum at a lower rate than it does currently. Sprint (S) and Clearwire’s (CLWR) existing agreement expires at the end of 2012.

In a note to clients, Wells Fargo analyst Jennifer Fritzsche called Clearwire “a critical strategic asset for Sprint” and said a contract extension would give Sprint “an important longer term competitive advantage.” Sprint would have the “deepest spectrum portfolio” of any national carrier.

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. Clearwire shares have plummeted this year, in part because of fears that Sprint would offer little or no help in building out Clearwire’s LTE network. A long term agreement between the two companies would dampen speculation that Clearwire is headed to bankruptcy. It would also make it easier for the company to seek additional funding or a partnership with another carrier.

Sprint CEO Dan Hesse disclosed this week in a conference call that his company has reached a non-binding cooperation agreement with Clearwire for fourth generation network capacity using LTE technology. Clearwire’s wireless spectrum is needed to supplement Sprint’s 4G LTE network, which it plans to roll out next year. Surging sales of smartphones and other wireless devices have many carriers scrambling to control spectrum.

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.

Despite its strong ties to Clearwire, Sprint has 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.

INFO:
http://seekingalpha.com/article/302335-sprint-nextel-s-ceo-discusses-q3-2011-results-earnings-call-transcript?part=qandaClearwire

(Nasdaq: CLWR)

Sprint Nextel (NYSE: S)

Authored by: Pat Anson, Editor