Sprint Makes It Pretty Clear: Clearwire's on Its Own

Sprint Nextel (NYSE: S  ) unveiled a new plan to upgrade its national wireless network on Friday, and Kirkland, Wash.-based Clearwire (Nasdaq: CLWR  ) is not part of the picture. That sent Clearwire shares into a nosedive, losing a third of their value in afternoon trading.

It had previously seemed that Sprint, as the majority shareholder, might have to play a key role in helping Clearwire remake its own network. Clearwire is a wholesale provider, but its early fourth-generation (or 4G) network is based on a kind of wireless technology called WiMax -- and WiMax is quickly being displaced as long-term evolution, or LTE, becomes the industry standard.

Clearwire has said it needs close to $1 billion for its network upgrade -- some $600 million to add LTE, with another $300 million or so to finish work on its existing WiMax infrastructure. But yesterday, Sprint announced a $5 billion plan to upgrade its own network. And an investment in boosting Clearwire wasn't part of the plan.

Even before yesterday, Sprint had been sending increasing public signals that Clearwire is basically on its own. And the company hammered home the point even further on Friday: As the Puget Sound Business Journal reports, Sprint said it wouldn't offer Clearwire-compatible phones after next year, and CEO Dan Hesse said Sprint had "nothing beyond 2012 to announce" about network arrangements with Clearwire.

There's also this Associated Press report on the analyst and investor meeting, which includes this key scene with Hesse basically pooh-poohing Clearwire's situation:

"In a testy exchange with Sprint executives, a member of the audience at the investor meeting questioned why Sprint would risk forcing Clearwire to seek bankruptcy protection when it owns 54% of the company, and could lose its share of Clearwire's spectrum in a bankruptcy case.

Sprint executives didn't directly address that possibility, but Hesse noted that no bankruptcy case involving a wireless company has resulted in a disruption of service."

Clearwire's response was similar to the notes it's sounded recently: Despite all the turmoil, it has lots of spectrum, and "Sprint remains dependent on Clearwire for 4G" today.

"As demand for mobile data increases, Clearwire remains the only viable 4G wholesaler with an operating 4G network, substantial spectrum resources, and a global technology road map to serve this growing market," the company said in a statement.

Curt Woodward is the senior editor at Xconomy Seattle. Reach him at cwoodward@xconomy.com. Get story feeds and more on Twitter, @curtwoodward, and Facebook, on.fb.me/curtwoodward.

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Read/Post Comments (7) | Recommend This Article (3)

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Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On October 08, 2011, at 3:34 PM, jhf678 wrote:

    I think they have to and need to build their own to compete with AT&T and Verizon own LTE network in the long run. If they are too dependable on Clearwire, they can`t compete. Clearwire will find another suitable client soon.

  • Report this Comment On October 08, 2011, at 5:19 PM, jopow wrote:

    Everybody on Wall St are scratching their heads how this whole flawed relationship ever happened in the first place. Both sides that started their marriage screwed up royally in not figuring out all possible contingencies and long term commitments. They even had to sue because their legal agreements were flawed and had too many ambiguities.

    Sprint yesterday would have been far better off to tell Wall St that they had made a huge mistake with Clearwire, give the reasons, and just be honest that they need to move on from a bad deal that went sour.

    Maybe even Sprint owes damages to Clearwire, and if so, Sprint writes out a check for its caused damages to Clearwire.

    The sooner these two spatting spouses divorce, the better off everybody will be.

    Right now, the way it is being handled, it looks like

  • Report this Comment On October 08, 2011, at 8:36 PM, conradsands wrote:

    Consumers are finally noticing that AT&T and Verizon = The Most Expensive Wireless Plans in America. We know where Verizon and AT&T (both in the top 5 for corporate lobbying) get all that money to run commercials 24x7, pay out huge “fat cat” executive bonuses and hire armies of lawyers and lobbyists to push the U.S. market into a wireless industry duopoly -- the American consumer.

    Sprint Nextel has been recognized as a J.D. Power 2011 Customer Service Champion — one of only 40 companies to have earned this distinction this year. To qualify for inclusion on this elite list, the companies must not only excel within their own industry, but also stand out among leading brands in 12 major industries evaluated by J.D. Power and Associates.

  • Report this Comment On October 08, 2011, at 9:19 PM, jhf678 wrote:

    conradsands makes the point. I couldn`t agree more.

  • Report this Comment On October 09, 2011, at 6:18 AM, rugoingplaces wrote:

    Here is my take on sprint. But first let me qualify or disqualify myself as a stock picker. I do really well buying on market psychology such as over exuberance in the news, as well as buying when everything hits the fan and selling when the world goes back to normal. I can also catch a once good company losing there niche and not able to re-invent.recent example R.I.M being slaughtered by apple and the android. It seemed like a no brainier. I have had some no brainers that just didnt go my way at all. so I ask! What could go wrong with sprint. Yes they are hurting and I am sure the price will go lower. They may very well get near bankruptcy but I cant see that actually happening. I strongly feel that Verizon and Att&t would be given the opportunity to buy sprint before a bankruptcy. Why would sprint choose bankruptcy. I think even they would say game over at that point. They would have tried everything they could by then. Lower prices, Apple phones etc. SO MY Question..lol what do we think verizon or att$t would value sprints stocks at if it came to that. This seems to me like a smart , long term play but I will admit easly there could be a bunch I am missing with these three carriers. What do you think?

  • Report this Comment On October 09, 2011, at 6:41 AM, rugoingplaces wrote:

    I am adding a small addition to the last post.Although I am talking about Sprint going bankrupt I would prefer to see sprint turn this around and start adding customer. I love the one price/ all included plans and the cell service is by in large acceptable to me living on the east coast.. This pick seems like it has an " out " if all goes south for Sprint and lots of upside. That again is if my assumption about Sprint not making its way into bankruptcy but instead being purchased by it competitor

    Also for anybody that read these,I realize my grammar is poor, so thanks for pushing through, in order to get to my question. Thank goodness for spell check or it could be way worse. Good luck to everybody..

  • Report this Comment On October 09, 2011, at 11:27 PM, jhf678 wrote:

    The iPhone is going to sell itself. Any company who has the iPhone is going to do well. Anybody live in the Eastcoast would love to have unlimited plan with the iPhone for a reasonable price.

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