Sprint Nextel's CEO Dan Hesse (pictured) signaled to investors and customers that a pricing dispute with its 4G network provider Clearwire is on the verge of a resolution, according to a Wall Street Journalreport. For customers holding a Sprint 4G smart phone and investors in the carrier, Hesse's comments offered some reassurance.
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.
The partnership between Sprint and Clearwire has endured other static as well since the two companies combined their WiMax businesses in 2008. Clearwire ventured off to create a retail presence, putting it in direct competition with Sprint Nextel stores. Last month, however, Clearwire decided to spend its resources on expanding its network, rather than its retail operations, according to a Bloomberg report.
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.
Get info on stocks mentioned in this article: