Sprint Nextel and Clearwire have reached agreements that potentially could provide up to $1.6 billion in payments and funding for Clearwire over the next four years and help resolve some of the financial uncertainty surrounding the wireless service provider.
Clearwire also said that it has made interest payments totaling $237 million on its first-priority, second-priority and exchangeable notes that were due Dec. 1.
Clearwire has been rolling out mobile broadband services and its 4G network currently coverage areas where about 130 million Americans live.
But the wireless service provider has faced growing financial worries. During its third quarter earnings call Clearwire said that it might run out of funds in a year and that it would need to raise additional capital.
Clearwire shares increased following the announcements of new funding and the fact that it had made scheduled debt payments.
The deal is also important for Sprint because it could provide the wireless carrier with much-needed capacity for 4G rollouts.
Sprint owns 49.6% of Clearwire. Other investors include Intel Capital, Comcast, Sprint, Google, Time Warner Cable, and Bright House Networks.
As part of the agreements, Clearwire will receive a total of $926 million from Sprint for unlimited 4G WiMax services, with about two-thirds of those payments being made in 2012 for unlimited 4G WiMax retail services during 2012 and 2013.
The two companies have also agreed that Sprint will have access to the WiMax Network at least through 2015 and Sprint agreed to provide support for future LTE services.
In addition, the companies agreed on the parameters for additional Sprint equity investments in Clearwire. If Clearwire raises new equity between $400 and $700 million, Sprint will participate in the offering on a pro rata basis consistent with its 49.6% ownership of Clearwire and invest up to $347 million.
"These agreements are a result of the technical MOU we outlined during our third quarter results call and extend our relationship with Clearwire," said Dan Hesse, Sprint CEO, in a statement. "It provides Sprint improved pricing, allows us to continue to provide WiMax 4G services to our customers today and to new customers in the future and provides additional LTE capacity to help complement our Network Vision strategy and meet our customers' growing data demands."
"Today's announcement further cements the mutually beneficial relationship between our two companies," added Erik Prusch, president and CEO of Clearwire, in a statement. "It is an important step toward meeting Clearwire's key goals of extending our current 4G network arrangement, securing a commitment to our future LTE Advanced-ready network, and funding the business. We continue to move closer to realizing the full value of our deep spectrum resources as we are uniquely positioned to meet the rapidly growing demand for 4G mobile broadband."
The agreements also modify prior wholesale pricing agreements and provide Sprint with unlimited access to Clearwire's WiMax network to meet its growing 4G data demands. The deal establishes long-term usage-based pricing for WiMax services in 2014 and beyond that will give Sprint will have access to Clearwire's WiMAX network through at least 2015.
The agreements also lay the foundation for the deployment of Clearwire's planned LTE Advanced-ready overlay network and outline the terms for Sprint access to that additional LTE capacity.
Sprint will pay Clearwire up to $350 million in a series of prepayments over a period of up to two years for LTE capacity if Clearwire achieves certain goals in the deployment of the network by June 2013.
Sprint expects to launch devices including laptop cards and phones that will use Clearwire's TDD-LTE network in 2013.