This Day On The Street
Continue to site
ADVERTISEMENT
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

Clearwire Benefits From Sour Deal

The following commentary comes from an independent investor or market observer as part of TheStreet's guest contributor program, which is separate from the company's news coverage.

NEW YORK ( Trefis) -- After months of postponment, Sprint (S) finally gave up on its LTE deal with Lightsquared last Friday.

Sprint had extended its Dec. 31, 2011 deadline to March 15 to give Lightsquared more time to secure regulatory approvals for its LTE network plans. However, the FCC said last month that it will not be able to grant clearance for the proposed network as it found potential interference issues with GPS receivers that could harm public safety.

With Sprint's relationship with Clearwire on a much stronger footing now, it made little sense for Sprint to continue to hope for a Lightsquared turnaround. Instead, it can now give its own as well as Clearwire's plans to aggressively deploy LTE networks complete attention as rivals Verizon (VZ) and AT&T (T) continue to add more markets to their ever-expanding LTE footprint. .

See our complete analysis for Sprint stock here.

Last year, Sprint opted to use the resources of a few other wholesale providers in addition to its own to aggressively build out LTE coverage and make up for lost time as AT&T and Verizon marched ahead with their LTE plans.

But when it chose Lightsquared ahead of Clearwire, which not only has a majority stake in but is also its 4G WiMax network provider, last July, the news shocked the markets, causing Clearwire's stock to fall almost 24%.

However, Sprint still needed Clearwire's WiMax network for its existing WiMax subscribers. So when Clearwire threatened to default on an interest payment last December, Sprint had to yield. As a result, Clearwire worked out a huge $1.6 billion network sharing agreement that not only addressed its financial woes but also secured it cash for a LTE build-out. Sprint had to share a part of the $4 billlion debt it had raised for this deal.

Considering that the company's balance sheet was laden with debt, Sprint's management might have felt that they were pushed into a corner, but in hindsight, they couldn't be more relieved now. In fact, as a sign of improving relations with Clearwire, Sprint has recently tapped the debt market again for another $2 billion, a part of which it intends to use to finance Clearwire's LTE network.

1 of 2

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Options Profits

Our options trading pros provide over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • Actionable options commentary and news
  • Real-time trading community
SYM TRADE IT LAST %CHG
AAPL $130.54 0.00%
FB $80.29 0.00%
GOOG $533.99 0.00%
TSLA $249.45 0.00%
YHOO $43.35 0.00%

Markets

DOW 18,040.37 +29.69 0.16%
S&P 500 2,111.73 +4.34 0.21%
NASDAQ 5,082.9290 +12.9030 0.25%

Partners Compare Online Brokers

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs