Sprint Said Near Deal With Clearwire

By Olga Kharif and Scott Moritz - Oct 28, 2011 6:29 AM GMT+0700

Sprint Nextel Corp. (S) and Clearwire Corp. (CLWR) are near an agreement to extend their existing network- sharing agreement for three to five years, said three people with direct knowledge of the matter.

The deal would allow Overland Park, Kansas-based Sprint to use Clearwire’s network to provide services to its customers after the current pact expires at the end of 2012, said the people, who wouldn’t be identified because the matter isn’t public. Though details are still being negotiated and a final accord isn’t certain, the price Sprint pays for Clearwire to handle its traffic is likely to fall, the people said.

A new wholesale agreement would put Clearwire, the money- losing wireless broadband provider, on more stable financial ground. The company has said it needs about $1 billion to shift its network to Long-Term Evolution, or LTE, wireless technology and finance its operations. Sprint, the third-largest U.S. wireless operator, owns a majority of Clearwire and is its largest wholesale customer.

“Assuming that Sprint and Clearwire sign a new agreement, it provides Clearwire with an ongoing source of revenue,” Michael Nelson, an analyst at Mizuho Securities USA Inc., said in an interview. “This would likely help them get funding, because it would provide increased visibility into revenue- getting opportunities and reduce the risk profile.”

No Sprint Financing

Sprint won’t provide financing to Kirkland, Washington- based Clearwire under the new pact, two of the people said. Clearwire had previously said it is looking at additional wholesale agreements and spectrum sales as potential sources of funds.

When Sprint said Oct. 7 that it would stop selling devices that use WiMax, Clearwire’s existing wireless technology, signaling the partnership may end next year, Clearwire’s stock fell 32 percent. Sprint CEO Dan Hesse said on a conference call yesterday the two companies are negotiating a possible contract extension, lifting Clearwire shares 20 percent.

Sprint would benefit from lower pricing, as well as additional network capacity, which it may need as more of the company’s customers use smartphones to watch mobile videos, check e-mail and browse the Web. The company recently began selling Apple Inc. (AAPL)’s popular iPhone.

Sprint rose 4.8 percent to $2.63 at the close in New York and was little changed in extended trading. The company has dropped 38 percent this year. Clearwire fell 2.6 percent to $1.91 at the close and gained as much as 11 percent to $2.12 in late trading. Clearwire has lost 63 percent in the last 12 months.

To contact the reporter on this story: Olga Kharif in Portland, Oregon, at okharif@bloomberg.net; Scott Moritz in New York at smoritz6@bloomberg.net;

To contact the editor responsible for this story: Peter Elstrom at pelstrom@bloomberg.net