New Clearwire funding won't guarantee LTE plan

The WiMax carrier raised $734M this week but needs more before it can commit to deploying LTE

Clearwire's big payday on Tuesday, when it raised $734 million through a stock offering and a new investment by majority owner Sprint Nextel, helped the WiMax carrier but didn't seal the deal on its planned LTE network.

A new offering of Clearwire stock brought in $402.5 million, the company announced on Tuesday. By raising more than $400 million, Clearwire triggered an additional investment by Sprint that was built into a multifaceted deal the two companies reached earlier this month. Sprint exercised its pre-emptive right to buy 173.6 million more shares of Clearwire, injecting $331.4 million into the company.

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But Clearwire's plan to build an LTE network, which Sprint would use as part of its overall LTE strategy, is still contingent on the company raising additional funds, Clearwire spokesman Mike DiGioia said on Thursday.

The WiMax network that powers Clearwire's own Clear branded service and Sprint's 4G offerings was the first 4G system in the U.S. But because the world's mobile industry is shifting toward LTE, that technology is expected to offer more options in terms of devices, equipment and future enhancements.

When it announced its LTE plan in August, Clearwire said it needed to raise about $600 million to build it. But at least part of the $734 million raised on Tuesday will be needed for its current network, DiGioia said. At the end of the third quarter, Clearwire had cash and investments of about $711 million, but the company has continued to lose money. Before the deal with Sprint was announced on Dec. 1, Clearwire had warned it might miss a $237 million interest payment that day.

The success of the funding round could help Clearwire to raise more money, but its prospects are likely to depend more on how it executes its business, said analyst Roger Entner of Recon Analytics. He expects Clearwire to try to raise more money through a debt or equity offering. Sprint would probably chip in again to match a stock offering, because it wants to maintain its stake in Clearwire, he said. In the agreement announced Dec. 1, the companies said if Clearwire could raise between $400 million and $700 million, Sprint would participate by investing as much as $347 million.

While the prospects for a Clearwire LTE network remain foggy, they grew dimmer Wednesday for Sprint's other prospective LTE partner, LightSquared. A federal agency said tests of LightSquared's infrastructure showed it would harm a majority of general-navigation GPS (Global Positioning System) receivers and some air safety systems.

Sprint plans to build its own LTE network but in time would use Clearwire's for additional capacity in some areas. In addition, Sprint has a deal with LightSquared under which it would host spectrum for the wholesale mobile data startup on its planned Network Vision infrastructure. Sprint would receive credits to use some of LightSquared's LTE capacity. Sprint's Network Vision system will be designed to accommodate multiple types of technologies and blocks of frequencies.

However, Sprint should have enough capacity in its own LTE network for at least the next few years, making the third-biggest U.S. mobile operator less dependent on its struggling partners, Entner said.

The move to LTE will not mean an immediate end to the WiMax network that currently serves about 10 million subscribers to Clearwire and its wholesale partners. If and when Clearwire deploys LTE, it plans to keep the WiMax network running for at least a few years. The company has so much spectrum it can accommodate both systems and offer services on both. Sprint will continue selling WiMax devices with two-year contracts through at least 2012 and has the right to use the Clearwire WiMax network through at least 2015.

Stephen Lawson covers mobile, storage and networking technologies for The IDG News Service. Follow Stephen on Twitter at @sdlawsonmedia. Stephen's e-mail address is stephen_lawson@idg.com

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