Sprint Nextel and Clearwire Close to Resolving Pricing Dispute
Sprint Nextel (S), which holds a 54% stake in Clearwire (CLWR), found itself over a barrel in October after it announced it would offer a super-fast 4G network in major U.S. cities by the end of the year as part of its partnership with Clearwire. Shortly after Sprint began introducing the 4G smart phones, however, Clearwire told the carrier it wanted more money to run the data-hogging devices on its network, according to the report. Hence, the five-month dog fight.
Sprint informed the cash-strapped Clearwire it wouldn't invest any more money in the company until resolving the wholesale price issue, leaving it with one less option to find funds to expand its 4G network.
Settlement Around the Corner
But with Hesse's comments Wednesday -- and those from Clearwire CEO Bill Morrow last month that a settlement was around the corner -- investors apparently feel more confident the issue will be resolved. Sprint Nextel's stock (S) is up 2.8% in midday trading, since its close on Tuesday prior to Hesse's comments, while Clearwire's shares (CLWR) are up 4.3%.
Hesse had threatened to find another 4G network provider if Sprint and Clearwire couldn't reach a resolution. While Sprint could go that route, it would be shooting itself in the foot since it's a majority owner in Clearwire. Such a move would likely further deteriorate its investment.
That gesture also served as an olive branch, as Sprint had been pressuring Clearwire to focus on expanding its 4G network. While gestures are nice, investors are now waiting for the companies to take the next step and seal a pricing deal.