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Sprint partner pondering next debt payment

A tight budget at Clearwire Corp. could lead the provider of Sprint-Nextel Corp.’s fastest wireless service to skip a debt payment due next week, according to a published report.

Clearwire’s CEO Erik Prusch told the Wall Street Journal that the scheduled $237 million payment would be a “significant drain” on Clearwire’s available cash. The Journal said Clearwire has a 30-day grace period on making the Dec. 1 payment.

“It’s a very expensive payment that we have,” Prusch said, according to the Journal’s online report. “It would be a significant drain of our cash, so we have to evaluate everything in terms of our decision of where we’re going.”

A Clearwire spokeswoman replied to a query about the report by issuing a brief statement that said, “Clearwire does not comment on speculation. The company remains focused on growing its wholesale and retail business and raising additional funds.”

An analyst went further.

“We had an opportunity to speak with CLWR (Clearwire) management on this issue and believe that these quotes were taken out of context and were more in reference to the question as to why investors are focused on this debt payment,” Jennifer Fritzsche of Wells Fargo Securities wrote in an email to clients.

Fritzsche’s note said Clearwire’s CEO had declined to comment on whether the payment would be made.

Clearwire has said it has enough capital for the next 12 months but that it also is seeking nearly $1 billion to bolster operations and upgrade its fourth-generation wireless network from WiMax technology to Long Term Evolution, or LTE, technology.

Sprint Nextel buys access to Clearwire’s WiMax network to provide Sprint’s faster 4G service, which runs for example on EVO and Epic handsets. As such, Sprint is Clearwire’s largest customer and attuned to Clearwire’s success.

Last month, Sprint raised $4 billion from a private sale of bonds, pledging to use the money possibly to provide funding to Clearwire. Sprint spokesman Scott Sloat declined to comment whether the news about Clearwire’s problematic debt payment would trigger any funding from Sprint.

Sprint, which also is Clearwire’s largest stockholder, had acted this summer to shield its own finances from potential default questions at Clearwire. It surrendered some of its voting rights to eliminate investors’ concerns that a Clearwire default could become a Sprint liability.

Relations between the companies have been sometimes strained. Sprint has said it would no longer sell WiMax phones after the end of next year, though still use the WiMax network for its customer with WiMax phones beyond that date.

Sprint also has begun building its own LTE-technology 4G network that it has said would provide adequate capacity for an LTE-4G service through 2014. It has said access to LTE over Clearwire’s network would boost Sprint’s capacity by more than an additional year.

Shares of both companies fell. Clearwire’s stock shed 21 percent, a decline of 39 cents at $1.47. Sprint’s shares lost 8 cents, a 3 percent drop, to $2.62.

Bloomberg New contributed to this article.

| Mark Davis, mdavis@kcstar.com

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