Sprint Nextel may help finance Clearwire’s LTE network and keep offering WiMax service through 2015 under a set of agreements worth as much as US$1.6 billion that the companies laid out on Thursday.
The deals fleshed out a non-binding memorandum of understanding that the companies announced in late October and will help Clearwire to stay afloat and maintain its WiMax network, as well as build a planned LTE (Long-Term Evolution) system. As they detailed the new agreements, the companies also announced that Clearwire had made a scheduled $237 million interest payment on its debt, which Clearwire had suggested it might delay.
Thursday’s announcement helped to clarify how Sprint and Clearwire hope to maintain their current partnership and move forward. Clearwire and Sprint both use a WiMax network, now reaching more than 130 million U.S. residents, that was the country’s first 4G network. Sprint is Clearwire’s majority shareholder and biggest wholesale partner. However, Clearwire has struggled financially since its creation in 2008, and both companies have separately announced plans to adopt LTE, which is becoming the industry-standard 4G technology. They will also use different versions of LTE but have vowed to make them work together.
Sprint will pay Clearwire $926 million for unlimited access to its WiMax network in 2012 and 2013, subject to certain conditions, the companies said. Sprint said it will continue to sell WiMax devices through at least 2012 with two-year contracts and support them through the course of the contracts. Sprint gets long-term usage-based pricing commitments for WiMax in 2014 and beyond and will be able to use the WiMax network at least through 2015.
The companies also said they set competitive long-term pricing for re-wholesaling of WiMax by Sprint, allowing Sprint to set up MVNO (mobile virtual network operator) relationships with other carriers.
Looking toward the LTE future, the companies said they would collaborate on an LTE network plan and that Sprint would pay Clearwire as much as $350 million, over two years, for capacity on Clearwire’s LTE network. The deal gives Sprint long-term usage-based pricing for the network in 2012 and beyond. But Sprint’s payments depend on Clearwire meeting certain build-out targets and network specifications by June 2013.
Sprint is looking to Clearwire’s LTE network as a complement to its own LTE system, which is to be rolled out as part of its multi-technology Network Vision deployment starting next year. The two companies have agreed to identify cell sites where Clearwire’s LTE will help Sprint cover “hot spots” with high demand for mobile data. And depending on the timing of the buildout, Sprint said it expects to start selling devices including phones and laptop cards that support Clearwire’s network starting in 2013.
Sprint CEO Dan Hesse welcomed the new set of arrangements.
“It provides Sprint improved pricing, allows us to continue to provide WiMax 4G services to our customers today and to new customers in the future and provides additional LTE capacity to help complement our Network Vision strategy and meet our customers’ growing data demands,” Hesse said in the companies’ press release.
The companies also agreed on conditions for Sprint to make an equity investment in Clearwire. If Clearwire can raise new equity of between $400 million and $700 million, Sprint will participate in the funding by investing as much as $347 million, they said.
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 firstname.lastname@example.org