Clearwire to Raise $1.1B but Keep Its Belt Tight
Clearwire plans to raise more than US$1.1 billion through a debt offering in the coming days, but steps the WiMax network operator took recently to conserve cash will remain in place.
The company announced on Thursday it will make a series of debt note offerings that could bring in a total of $1.275 billion. However, it continues to pursue additional options for funding, including investments from existing investors and third parties, and the possible sale of excess radio spectrum, according to spokesman Mike DiGioia. Clearwire is a joint venture formed with investments from Comcast, Google and other partners, and majority-owned by Sprint Nextel. Sprint, which resells the WiMax service, recently said it may invest even more in the company.
Clearwire's WiMax network now covers 68 U.S. markets and reaches 103 million potential subscribers, and the carrier still plans to reach 120 million U.S. residents by the end of the year. However, Clearwire will face its most daunting competition beginning on Sunday, when Verizon Wireless commercially launches its LTE mobile data service in at least 38 cities. In its third-quarter financial report last month, Clearwire said it had gained 1.23 million subscribers but lost $139 million.
With the third-quarter report, Clearwire also announced it would lay off 15 percent of its staff and delay the introduction of its first branded smartphone as part of a broad initiative to conserve cash. Other austerity measures included reducing its workforce of contractors, foregoing marketing and retail sales in some new markets, and suspending preliminary work toward expansion of its network footprint beyond its current build plan.
The new debt offerings will not affect those cash-conservation initiatives, DiGioia said.
Also on Thursday, Clearwire announced that Sprint had nominated three new members to Clearwire's board of directors to replace Sprint executives who resigned earlier this year. Sprint said the executives, including its CEO, Dan Hesse, resigned because of concerns over possible antitrust issues. Sprint has the right to name seven of the board's total of 13 members, and removed only those from its own management team.
To take the place of those executives, Sprint nominated three outside directors. Hossein Eslambolchi is a technical adviser to Ericsson and the University of California School of Engineering and is the former chief technology officer of AT&T. William Blessing is a consultant to the engineering and construction firm Burns & McDonnell and a former executive of Embarq. Mufit Cinali is a managing director of Springwell Capital Partners and has worked at AT&T and other companies. They are expected to be elected at Clearwire's next board meeting on Dec. 10.