A new network-sharing deal with Sprint Nextel paved the way for partner Clearwire Corp. to meet an imposing deadline Thursday of $237 million in interest payments.
Sprint, meantime, agreed to buy wholesale wireless capacity from Clearwire that it will resell to its own customers, the two companies said in a joint statement. Sprint owns 54 percent of Clearwire.
For Clearwire, the bargain could generate up to $1.6 billion over four years. The company has been losing money and been struggling to find the cash needed to expand its wireless high-speed network.
“Today’s announcement further cements the mutually beneficial relationship between our two companies,” Erik Prusch, Clearwire’s chief executive officer, said in the statement.
News of the deal came as investors had wondered whether Clearwire would meet its payment deadline, or hold on to cash to support its network.
And it resolves tension between Clearwire and Sprint about whether they could come to terms beyond a previous agreement on sharing networks through the end of next year. Sprint is not only a majority owner of Clearwire, it is far and away its largest customer.
Under terms of the agreement announced by the carriers, Sprint will pay Clearwire $926 million for WiMax services in 2012 and 2013. But both companies are switching to an alternative technology to power what the industry refers to as 4G wireless speeds. The two are transitioning from WiMax to long term evolution, or LTE, technology that’s fast becoming the dominant industry standard. But Clearwire said it will continue to keep WiMax signals working — critical to people using Sprint’s current lineup of 4G phones — through at least 2015.
Clearwire badly needed a shift in finances. Without the new agreement, the Bellevue, Wash.,-based company would have had just $350 million to $400 million to keep it running through next years, assuming it kept pace with creditors’ demand. Standard &Poor’s lowered Clearwire’s debt to CCC last week.
Although Sprint has been raising money to modernize its own network, it’s still heavily reliant on Clearwire’s substantial network — even though expansion of Clearwire coverage has been at a near standstill for about a year.