Clearwire Details LTE-Advanced Advantages, but Debt Issues Loom


Clearwire (NAS: CLWR) CTO John Saw said that when the company does deploy "LTE-Advanced-ready" network technology, it will be able to tap into the benefits of LTE-Advanced, a standard that was just finalized earlier this year and is still not ready for primetime in terms of devices. However, in an interview with Connected Planet, Saw said the technology will enable Clearwire to deploy multiple 20 MHz carriers on contiguous spectrum using carrier-aggregation technology, thus giving the company fatter pipes and more network capacity.

In the interview, Saw also explained that Clearwire chose to deploy TDD-LTE rather than the more common FDD variant used by Verizon (NYS: VZ) Wireless and AT&T (NYS: T) Mobility because it will give Clearwire greater flexibility. TDD uses the same spectrum for uplink and downlink connections, which will enable Clearwire to dynamically allocate more capacity depending on the constraints being put on the network. Clearwire's current WiMAX network uses TDD technology.

However, before Clearwire can begin deploying LTE, it must receive new funding. Clearwire said it will need at least $600 million in additional capital to deploy LTE -- and the company's current financial picture is not rosy.

Standard & Poor's said Clearwire will run out of cash in 2012, and revised its outlook on Clearwire's debt to negative. Meanwhile, the yields on Clearwire's bonds are approaching levels consistent with an impending default. "We have sufficient liquidity to fund our current WiMAX operations for at least the next 12 months," Clearwire spokeswoman Susan Johnston told Bloomberg. "We expect our operations to begin generating positive EBITDA in Q1 of 2012."

Sprint Nextel (NYS: S) reduced its voting stake in Clearwire in June to below 50 percent in a bid to protect its balance sheet and clear the air with investors over potentially being held liable should Clearwire default on its debt obligations. Sprint reduced its voting rights in Clearwire from around 54 percent to 49.8 percent, but maintained its 54 percent economic stake in Clearwire.

S&P said it is not confident in Clearwire's funding future. "Moreover, we believe that even if Sprint Nextel were to provide additional funding for Clearwire, or if Clearwire were to raise capital by selling spectrum assets, the rating would likely remain in the 'CCC' category until Clearwire obtained greater self-sufficiency," S&P credit analyst Allyn Arden said in a statement.

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