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Originally published December 1, 2011 at 6:33 PM | Page modified December 2, 2011 at 1:16 PM

Deal with Sprint steadies Clearwire's future

Clearwire stock gained 14 percent after it made a $237 million interest payment to creditors and struck a new network-sharing agreement with partner Sprint Nextel.

Bloomberg News

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Clearwire made a $237 million interest payment to creditors and struck a new network-sharing agreement with partner Sprint Nextel on Thursday.

That pushed the stock of the money-losing wireless carrier up 25 cents, or 14 percent, to $2.03. It has declined 61 percent this year.

The companies said Clearwire will get as much as $1.6 billion over the next four years, helping address its cash needs as it shifts to higher-speed wireless technology.

Founded by wireless pioneer Craig McCaw in 2003, Bellevue-based Clearwire has posted widening losses for years amid competition from larger rivals.

"This is a significantly positive development for Clearwire," said Michael Nelson, a Mizuho Securities USA analyst in New York. "One could argue whether it spared them from bankruptcy, but it certainly extended the runway."

The companies will extend an agreement under which Sprint buys wholesale WiMax wireless capacity from Clearwire then resells the 4G services to its own customers.

The deal comes after a standoff over how the two would work together when their current network deal runs out at the end of 2012. Sprint, which is Clearwire's largest shareholder and wholesale customer, had said it would stop selling devices that use WiMax, Clearwire's existing technology, after next year.

Clearwire has said it needs about $1 billion to roll out a long-term evolution, or LTE, wireless network and fund operations. And while the Sprint deal is significant, Clearwire said it plans to raise additional funding, too.

"This is an important piece in the mix of capital we need," Clearwire Chief Executive Erik Prusch said in a phone interview Thursday. "This piece was critical."

Clearwire will get $926 million for WiMax services in 2012 and 2013 and up to $350 million in prepayments for LTE services from Sprint under the agreement, the companies said. Sprint also agreed to provide up to $347 million in equity funding if Clearwire sells new shares.

Clearwire will sell equity "sooner rather than later," Sprint finance chief Joe Euteneuer said Thursday at a conference in Orlando, Fla.

As part of its fundraising plans, Clearwire has also considered options like selling wireless spectrum and loans from equipment suppliers to pay for gear purchases.

"We are considering a complement of approaches," Prusch said, declining to comment on what option is next.

Prusch also said Clearwire is committed to building its LTE network on time. One of the conditions of the agreement with Sprint is that Clearwire achieves certain build-out targets and network specifications by June 2013.

"Without this deal, there would have been increased challenges for them to raise additional funding," analyst Nelson said.

Without the new agreement, Clearwire would have had only $350 million to $400 million left for next year's operations after paying creditors, according to Standard & Poor's.

"Right now, Sprint needs Clearwire and Clearwire needs Sprint," David Novosel, an analyst at Gimme Credit in Chicago, said before the agreement.

Sprint couldn't afford to lose access to Clearwire's spectrum, Novosel said. If Clearwire had failed to pay creditors and needed to restructure its debt, the spectrum Sprint uses might have been auctioned off to the highest bidder.

The peace between the two partners came at a cost as the companies compete against larger AT&T and Verizon Wireless, said Ned Zachar, a portfolio manager at KLS Diversified Asset Management in New York.

"It would have been better if they had gotten to this deal six months or nine months ago," Zachar said. "The uncertainty and the very mixed signals obviously hurt both companies. Sprint's competitive spirit should have been directed at AT&T or Verizon rather than at Clearwire."

The stock of Sprint, based in Overland Park, Kansas, was unchanged at $2.70.

It has lost 36 percent this year.

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