Sprint reduces voting stake in Clearwire
The action removes risk of Clearwire being considered a subsidiary, which would make its debt a Sprint liability
Published: 8 June, 2011
READ MORE: US | Clearwire | MVNO
The saga of Sprint's tangled relationship with Clearwire continues, with the cellco cutting its voting stake in the WiMAX joint venture just as many thought it was set to announce a closer union. It has reduced its holding to less than 50%, it said, to address investor concerns that its partner could be considered as a subsidiary, with its debt consequently becoming a liability on its balance sheet.
Sprint insisted there was no change to the commercial relationship and that the Class B shares it surrendered had little financial value. However, its voting interest is now down to 49.9% from 54%, avoiding the 'subsidiary' question, though the carrier retains the same economic interest in the venture and is still widely expected to take full control at some stage - though not in the near future. If Clearwire were considered a unit of Sprint, its losses could trigger a default in Sprint's loan agreements.
"By taking this action, Sprint is proactively providing protection and flexibility with respect to its debt agreements and eliminating ongoing investor concerns about any potential cross-default risk," a company spokeswoman said.
Sprint will also be keen to minimize any hit on its balance sheet, which will be affected anyway by the heavy investment program in the Network Vision modernization program. The carrier should soon announce exactly how Clearwire will fit into this, and its 4G strategies. The most likely scenario is that the two will share the Network Vision infrastructure and migrate Clearwire, over time, to LTE, and they may also pool spectrum. Sprint is also reported to be close to a more limited site sharing deal with LightSquared.
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