Sprint and Clearwire announced an agreement worth “up to US$1.6 billion over the next four years,” including payments for WiMAX services, possible pre-payments for LTE services, and “potential equity investments.”
Significantly, the partnership is said to “lay the foundation” for Clearwire’s planned rollout of LTE technology, which had previously been announced – but with question marks remaining about its funding. Sprint said it will pay Clearwire up to US$350 million for LTE in a series of prepayments over two years, if the wholesale operator achieves certain build targets and network specifications by June 2013.
However, it also notes that Clearwire “plans to seek additional funding” before initiating the build-out of its LTE-Advanced ready network.
The agreement also establishes “long-term usage-based pricing for LTE services for 2012 and beyond,” and the companies have agreed to work on a network build plan – including jointly selecting LTE cell sites to cover Sprint’s high-use areas. The companies will also work together to “support the ecosystem for TDD-LTE in band class 41 for devices, chipsets and standards,” with Sprint planning to launch devices supporting the Clearwire network in 2013, “subject to the timing of the build-out and other factors.”
In addition, the latest agreement also modifies Sprint’s existing agreements with Clearwire for WiMAX services, with Sprint also making commitments to the now legacy technology for the medium term. Sprint said it will have access to the network “through at least 2015,” and that it “plans to continue selling WiMAX devices with two-year contracts through at least 2012 and support those devices through the life of the contract.”
Sprint will pay Clearwire a total of US$926 million for WiMAX services, two-thirds of which will be paid during 2012, for “unlimited 4G WiMAX retail services during 2012 and 2013, subject to certain conditions.” The agreements also establish long-term usage-based pricing models for WiMAX services in 2014 and beyond.
Sprint also committed to participating in any future Clearwire equity offerings in the US$400 million to US$700 million range. It has pledged to invest up to US$347 million, matching its current voting interest of 49.6 percent.
Erik Prusch (pictured), president and CEO of Clearwire, said that the refreshed partnership is "an important step toward 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.”
In line with the announcement, Clearwire said it had made interest payments totalling US$237 million on notes which were due this week. It had previously been reported that the company would miss this, with Prusch describing it as a “significant drain” on cash.
However, Bloomberg reported last week that this may have been a short-term ploy intended to draw further support from Sprint – in which case, it appears to have worked. While Clearwire still needs to raise cash sooner, rather than later, Sprint’s current pledge at least shows it will have the support of its largest shareholder.