Sprint, Clearwire Resolve Pricing Dispute

Author:
Updated:
Original:

Sprint Nextel and Clearwire came to terms on a new long-term wholesale agreement for wireless data services, under which Sprint agreed to pay Clearwire at least $1 billion during 2011 and 2012 for 4G services and which allows for usage-based pricing for most 4G wireless broadband services provided to Sprint.

Clearwire is majority owned by Sprint, which has a 54% stake, with other investors including Comcast, Time Warner Cable, Bright House Networks, Intel and Google.

Comcast, TWC and Bright House have separate wholesale agreements with Clearwire and Sprint to offer 3G and 4G wireless services.

Under the amended wholesale agreement between Sprint and Clearwire, Sprint agreed to minimum usage commitments of $300 million in 2011, $550 million in 2012 and $175 million in pre-payments for 4G wholesale services to be used in 2011 and beyond.

In addition, the companies reached an agreement on wholesale pricing for Sprint devices that operate on both Sprint's 3G network and Clearwire's 4G network, which includes usage-based pricing and volume discounts. The agreement also includes minimum payments per 4G device. The "dual-mode amendment" resolves a pending dispute concerning how Clearwire and Sprint will allocate future revenue from wireless broadband service usage by other parties whose devices use both Sprint's 3G and Clearwire's 4G networks.

Also, Sprint will pay Clearwire a net $28 million under a settlement agreement resolving separate disputes between the two parties over amounts for: prior usage by Sprint's end users of Clearwire's wireless broadband service; prior usage by Clearwire's end users of Sprint's 3G wireless service; and other disputes between Clearwire and Sprint over the allocation of revenue from wireless broadband services usage over dual-mode devices. Under the settlement agreement, the parties also agreed to withdraw from a pending arbitration proceeding.

"We are pleased to reach this wholesale pricing agreement with Clearwire," Sprint CEO Dan Hesse said in a statement. "We look forward to working with them under this new agreement to provide an expanded offering of 4G capabilities and solutions for Sprint customers."

"Sprint has been our biggest and most important customer and partner since we launched 4G services in the U.S. more than two years ago," Clearwire interim CEO John Stanton added. "Today's agreement further aligns Sprint and Clearwire's interests and lays the foundation for a continued, constructive relationship. We are pleased to have the resources and partnerships necessary to maintain our 4G leadership and leverage our significant spectrum and capacity for delivering mobile broadband services."

Clearwire's previous CEO, Bill Morrow, departed the company last month.

Clearwire and Sprint also said they plan to further collaboration to expand Sprint's capability to offer customized solutions using 4G technology. Under that agreement, Sprint expects to better serve enterprise and government customers with "mission-critical wireless broadband" services and expand its machine-to-machine wireless solutions for large and small businesses.

The agreement also expands the mutual re-wholesaling rights whereby both companies can resell the other's respective 3G and 4G networks to other parties. The companies said they expect the agreement to "open up new market segments" for each of them to both jointly and independently pursue.

Clearwire had 4.4 million total subscribers at the end of 2010, of which 3.3 million were wholesale subscribers. The Kirkland, Wash.-based company operates 4G WiMax networks in the U.S. currently covering areas where 120 million people live. Sprint had about 49.9 million customers at the end of 2010.

Sprint is scheduled to report first quarter 2011 earnings the morning of April 28; Clearwire's Q1 earnings call is set for May 4.

Related