Clearwire Shares Climb After Sprint Says It May Provide Financial Backing

By Sarah Frier - Nov 5, 2011 4:10 AM GMT+0700

Clearwire Corp. (CLWR), the unprofitable wholesale wireless carrier, rose after partner and main owner Sprint Nextel Corp. (S) said it may use proceeds from a note offering to help finance the company.

Clearwire gained 8 percent to $1.89 at the close in New York, after climbing as much as 29 percent. The shares have lost 63 percent this year on concern that the company will run out of money.

Money from Sprint would allow Kirkland, Washington-based Clearwire to fund its operations and help pay for a planned network upgrade. Clearwire said this week that it has capital for 12 months and that its future may depend on Sprint, with which it is in talks for a new wholesale agreement. Sprint had previously signaled that it wouldn’t provide Clearwire with financial backing.

“The fact that funding Clearwire is mentioned as a possible use of proceeds suggests the companies are moving in the right direction,” Jonathan Chaplin, an analyst at Credit Suisse in New York, said in a note to investors. He rates both Sprint and Clearwire shares “outperform.”

The debt sale is also a positive for Sprint because it shows that the company has access to capital markets, Chaplin said. Sprint, which didn’t disclose the size of the note offering, said last week it plans to refinance $4 billion of its debt and seek as much as $3 billion in financing from suppliers.

Sprint shares rose 2.1 percent to $2.87. The company also had its credit rating cut further into junk by Standard & Poor’s because of costs related to a planned network upgrade.

Network Deal

Sprint said proceeds from the sale of the seven- and 10- year notes will be used “for general corporate purposes, which may include, among other things, redemptions or service requirements of outstanding debt, network expansion and modernization and potential funding of Clearwire,” according to a company statement.

Leigh Horner, a Sprint spokeswoman, declined to comment beyond the statement. Mike DiGioia, a Clearwire spokesman, also declined to comment.

Clearwire said this week that its priority is to reach a new network-sharing agreement with Sprint, adding that a failure to do so could jeopardize operations. Clearwire has also said it needs about $1 billion for operations and to upgrade its network from the WiMax technology to long-term evolution, or LTE.

Fundraising Hampered

“We really have one overarching goal which is to get the company to profitability,” Clearwire Chief Executive Officer Erik Prusch said this week in an interview. “We want to have a long-term WiMax commitment, a long-term LTE commitment, and funding. We’ve got to get these things done as soon as we can.”

Sprint, which accounts for most of Clearwire’s revenue and customers, said last month it will stop selling WiMax devices after 2012. The carrier also said it may use Clearwire’s network to handle traffic from customers using LTE beginning in 2013, though the talks haven’t yet concluded. Their existing network- sharing agreement expires at the end of next year.

Clearwire said this week access to funding has been hampered by the “perceived impact of Sprint’s new 4G strategy on our business,” according to a company filing. “If these events continue to adversely affect us, additional capital may not be available on acceptable terms, or at all.”

To contact the reporter on this story: Sarah Frier in New York at sfrier1@bloomberg.net

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