The whole Sprint/Clearwire thing has been a complicated dance for years now, and while it never gets any simpler the future of both seem to be gaining a bit of clarity this week. For its part, Sprint unveiled its upgrade plans for its wireless business, awarding no less than three equipment contracts for their plans to consolidate their many separate networks onto one platform, the heart of which is a multi-mode base station supporting CDMA, iDEN, and WiMAX. The new gear also keeps the option of LTE available, while the iDEN portion will be phased out in 2013 (finally!).
It’s definitely not a minor project, Sprint may spend up to $5B over the next 3-5 years, and hopes to save $10-11B as a result. Alcatel-Lucent, Ericsson, and Samsung each picked up a piece of the work, which has been divided up by geography. Alcatel-Lucent will handle NYC, Philly, LA, and Boston, whereas Ericsson will take on Atlanta, Miami, Houston, Kansas City, and Dallas, and Samsung will finish up Chicago, Denver, Pittsburgh, San Francisco, and Seattle. The overall plan is simply to increase coverage, quality, and speed while simultaneously simplifying the overall business. Can’t argue with that – one wonders why they didn’t get started years ago.
Just where this fits in with Sprint’s majority holding in Clearwire depends on many things, not the least of which is Clearwire’s ability to finish what it has started. To that end they indeed managed to raise $1.3B last week in a combination of straight and exchangeable debt. It was expensive money at 12% for the first priority senior secured notes, but it was a necessary step. Purchasers have the option to buy another $100M, and some current shareholders (i.e. Sprint) still have the option to buy another pile of that exchangeable debt too, which could raise cash levels further by early 2011.
However, it appears that Clearwire isn’t done yet – they still plan to sell off a portion of their vast spectrum holdings. The idea is to raise another $2B or so. A little while ago, I likened this to ‘selling slices of golden goose’, as Clearwire’s spectrum holdings are potentially a key long term differentiator. But that only holds if the company makes it that far, so you gotta do what you gotta do I guess.
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