Sprint Considering Taking Control of Clearwire


Sprint Nextel (NYS: S) is considering buying more equity in Clearwire (NAS: CLWR) from Clearwire's other strategic investors, according to a Bloomberg report.

The report, citing unnamed sources, said Sprint is in talks with Clearwire's other investors, including Comcast, about an investment plan in which it would purchase the equity stakes and essentially take control of Clearwire. The report said the talks are preliminary and no deal is imminent. Other strategic investors of Clearwire include cable companies Time Warner Cable and Bright House Networks. Interestingly, the report added that Cox Communications and Cablevision, two MSOs that do not resell Clearwire's service, are also part of the discussions with Sprint.

It's not clear how any investment scheme would work at this point. The report said the discussions involve multiple scenarios, including a Clearwire buyout or an investment in Clearwire through Sprint. Sprint currently has a 54 percent equity stake in Clearwire.

Representatives from Sprint, Clearwire, Cablevision, Comcast, Cox and Time Warner declined to comment.

"In our view, Sprint is hedging its bets," wrote Jamie Townsend with TownHall Investment Research in a research note on the news. "While we continue to believe that LightSquared will find a political/financial solution to its GPS problems, we also suspect that these new rumors of talks by Sprint are a reflection of efforts by the company to hedge its bets in case the LightSquared situation cannot be resolved."

The report comes on the heels of one in the Wall Street Journal that said members of Sprint's board expect the carrier to make a "substantial" new investment in Clearwire. That report, which also cited unnamed sources familiar with the situation, said that the exact size and timing of the investment will depend on how quickly Clearwire can restructure its operations, and that the funding would help Clearwire into 2013. Sprint is expected to detail more of its 4G strategy at an investor meeting Oct. 7.

Under a revised wholesale agreement Sprint and Clearwire announced in April, Sprint committed to paying Clearwire $1 billion through the end of 2012. Clearwire has insisted it has enough liquidity to fund its business for another year. However, the company noted last week that it will need an additional $600 million to fund its transition to TDD-LTE and an extra $150 million to $300 million to maintain its existing mobile WiMAX business.

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