Skip to main content

Sprint, Clearwire Near WiMax Deal

Intel Capital is putting up $2 billion under the new arrangement, sources say.


(S) - Get SentinelOne, Inc. Class A Report




are close to announcing the formation of a WiMax joint venture funded in part by a $2 billion injection from


(INTC) - Get Intel Corporation Report

, say people close to the companies.

The deal, which could be announced in the next few days, would

create a new company that combines Sprint's licenses in the 2.5-gigahertz wireless spectrum and Clearwire's spectrum in the same and adjoining air waves.

Additional financing is also expected from other firms, say these same sources.

Sprint and Clearwire representatives declined to comment. Intel Capital did not respond to a request for comment.

Scroll to Continue

TheStreet Recommends

The two companies

revived deal talks, according to press reports, after Sprint

tore up a prior agreement in November. That earlier plan had called for Sprint to chip in $2.75 billion toward the expansion of WiMax networks to 19 cities by the end of this year, but the company pulled out of that pact in an effort to undo the work of former CEO Gary Forsee.

Among the top priorities for new CEO Dan Hesse has been deciding the fate of Sprint's costly WiMax effort. Sprint, under Forsee, essentially pinned the company's future on the promising mobile wireless broadband technology. But the $5 billion price tag estimated for the company to build a WiMax network on its own was too much for Sprint as it grapples with the ramifications of its failed merger with Nextel.

Through a joint venture with Clearwire and a big investment from Intel, Sprint can move the expenses off its books and yet still continue to pursue the so-called fourth generation opportunity in selling advanced mobile services.

Intel, meanwhile, benefits because it needs someone to build a national WiMax network so it can sell a bunch of WiMax chips for new devices. Desperation may be starting to take hold as the two largest wireless telcos --


(T) - Get AT&T Inc. Report



(VZ) - Get Verizon Communications Inc. Report

, have now chosen long-term evolution, or LTE, as the next network upgrade, bypassing WiMax.

For Clearwire's part, the deal would provide an immediate cash bailout as the company faces an eventual funding gap. Clearwire had about $1 billion in cash and investments at the end of the September quarter, but burned through about $400 million in cash to fund operations in that quarter, according to the company's most recent quarterly filing.

Intel Capital holds about a 25% stake in Clearwire. Clearwire founder Craig McCaw is the largest single shareholder, with a majority of the outstanding shares.