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Sprint, Partners to Pump $1.5 Billion Into Clearwire- is it enough to complete WiMAX buildout?
WSJ article: By JEFFREY MCCRACKEN And DON CLARK
Sprint Nextel Corp. and its partners are preparing to pump at least $1.5 billion more into Clearwire Corp., said two people familiar with the matter, adding yet more aid to a wireless broadband firm that has struggled to build out its next-generation network.
Sprint would invest $1 billion and its Clearwire joint venture partners, a group which includes Comcast Corp., Intel Corp, Time Warner Cable Inc. and Bright House Networks LLC, would kick in another $500 million, said these people. Google Inc., which has been a key joint venture partner, isn't involved in the latest financing round, these people added. An announcement of the new investment could come as soon as this week.
Spokespeople from Sprint, Clearwire, Comcast Time Warner Cable and Intel declined to comment. Officials from Bright House and Google weren't immediately available for comment.
Sprint is Clearwire's majority shareholder and unlike its rivals, which have bet on a rival technology, Sprint's plans for a higher-speed data transmissions are heavily tied to Clearwire's success.
The infusion comes about 18 months after Sprint, Intel, Comcast and other partners first put $3.2 billion into Clearwire, which is building the first so-called "4G" mobile broadband network, which moves data at very high speeds. That deal gave Sprint and the others a big ownership stake in Kirkland, Wash.-based Clearwire, which lost $241.4 million in the quarter ended June 30. It will report its latest quarterly results on Tuesday.
Clearwire shares have traded as high as $9 this year, but tumbled to around $6.50 in recent weeks. It has about 2,100 employees. At the end of June, it had about 511,000 phone and Internet subscribers in the United States.
Clearwire had in recent months been trying to attract new capital from other telecom companies such as Deutsche Telekom AG, these people said. But those efforts didn't pan out.
Sprint, whose market capitalization has dwindled to just $8 billion, also hired bankers to help it raise money for a new Clearwire infusion. At one point it had shopped around an equity stake in Sprint, said one of these people. Instead, Sprint will use money from its own cash pile or raise new debt for the $1 billion investment.
Founded in 2003 by cellular pioneer Craig McCaw, Clearwire was restructured in 2008 as part of a deal that combined the company with former Sprint operations and included the first cash infusion from Sprint and its partners.
The partners have been working to roll out a wireless broadband network across the U.S. Their plans are based on WiMax, a technology heavily promoted by Intel that is a longer-range cousin to Wi-Fi, the wireless technology built into most laptop computers. That effort has been costly and taken longer than expected.
The competition also is stiff; some consumers have been adopting technologies based on third-generation, or 3G, cellular networks offered by rivals such as AT&T Inc. and Verizon Wireless, a joint venture between Verizon Communications Inc. and Vodafone PLC. WiMax backers say it offers faster download speeds than 3G offerings and has a head start of two years or so over a comparable "fourth-generation" technology favored by many cellular carriers known as LTE, for long-term evolution.
Clearwire now markets its service in markets that include Las Vegas, Baltimore, Atlanta and Portland, Ore. Partners such as Sprint and Comcast also resell Clearwire's service under their own brands. Earlier this year, Clearwire hired William Morrow, an industry veteran with experience at Vodafone and other companies, as its chief executive.
Write to Jeffrey McCracken at jeff.mccracken@wsj.com and Don Clark at don.clark@wsj.com
Copyright 2009 Dow Jones & Company, Inc. All Rights Reserved
Comment and analysis: We don't think this is nearly enough money to complete Clearwire's planned buildout for 2010. We believe that vendor financing (perhaps from Cisco or other vendors with a cash horde) will be needed to realize Clearwire's business plan. But that's only a necessary part of the equation.
The equally important part is mobile devices. Netbooks and notebooks with embedded or USB dongle WiMAX will not create the mass market Clearwire and its partners need to succeed. Too much competition from free WiFi in developed countries, especially the U.S. Hand held devices with WiMAX interfaces are urgently needed. Forget about MIDs, which we don't expect to see until mobile broadcast TV is combined with Internet video in a hand held device. The WiMAX ecosystem needs devices like eReaders, smart phones, digital cameras, video recorders, mulit-user game players, smart meters, medical imaging instruments, mobile M2M gadgets, etc to entice subscribers. Without that, no amount of network infrastructure investment will result in a good ROI for Clearwire and its MVNO investors/partners.
Sprint Nextel Corp. and its partners are preparing to pump at least $1.5 billion more into Clearwire Corp., said two people familiar with the matter, adding yet more aid to a wireless broadband firm that has struggled to build out its next-generation network.
Sprint would invest $1 billion and its Clearwire joint venture partners, a group which includes Comcast Corp., Intel Corp, Time Warner Cable Inc. and Bright House Networks LLC, would kick in another $500 million, said these people. Google Inc., which has been a key joint venture partner, isn't involved in the latest financing round, these people added. An announcement of the new investment could come as soon as this week.
Spokespeople from Sprint, Clearwire, Comcast Time Warner Cable and Intel declined to comment. Officials from Bright House and Google weren't immediately available for comment.
Sprint is Clearwire's majority shareholder and unlike its rivals, which have bet on a rival technology, Sprint's plans for a higher-speed data transmissions are heavily tied to Clearwire's success.
The infusion comes about 18 months after Sprint, Intel, Comcast and other partners first put $3.2 billion into Clearwire, which is building the first so-called "4G" mobile broadband network, which moves data at very high speeds. That deal gave Sprint and the others a big ownership stake in Kirkland, Wash.-based Clearwire, which lost $241.4 million in the quarter ended June 30. It will report its latest quarterly results on Tuesday.
Clearwire shares have traded as high as $9 this year, but tumbled to around $6.50 in recent weeks. It has about 2,100 employees. At the end of June, it had about 511,000 phone and Internet subscribers in the United States.
Clearwire had in recent months been trying to attract new capital from other telecom companies such as Deutsche Telekom AG, these people said. But those efforts didn't pan out.
Sprint, whose market capitalization has dwindled to just $8 billion, also hired bankers to help it raise money for a new Clearwire infusion. At one point it had shopped around an equity stake in Sprint, said one of these people. Instead, Sprint will use money from its own cash pile or raise new debt for the $1 billion investment.
Founded in 2003 by cellular pioneer Craig McCaw, Clearwire was restructured in 2008 as part of a deal that combined the company with former Sprint operations and included the first cash infusion from Sprint and its partners.
The partners have been working to roll out a wireless broadband network across the U.S. Their plans are based on WiMax, a technology heavily promoted by Intel that is a longer-range cousin to Wi-Fi, the wireless technology built into most laptop computers. That effort has been costly and taken longer than expected.
The competition also is stiff; some consumers have been adopting technologies based on third-generation, or 3G, cellular networks offered by rivals such as AT&T Inc. and Verizon Wireless, a joint venture between Verizon Communications Inc. and Vodafone PLC. WiMax backers say it offers faster download speeds than 3G offerings and has a head start of two years or so over a comparable "fourth-generation" technology favored by many cellular carriers known as LTE, for long-term evolution.
Clearwire now markets its service in markets that include Las Vegas, Baltimore, Atlanta and Portland, Ore. Partners such as Sprint and Comcast also resell Clearwire's service under their own brands. Earlier this year, Clearwire hired William Morrow, an industry veteran with experience at Vodafone and other companies, as its chief executive.
Write to Jeffrey McCracken at jeff.mccracken@wsj.com and Don Clark at don.clark@wsj.com
Copyright 2009 Dow Jones & Company, Inc. All Rights Reserved
Comment and analysis: We don't think this is nearly enough money to complete Clearwire's planned buildout for 2010. We believe that vendor financing (perhaps from Cisco or other vendors with a cash horde) will be needed to realize Clearwire's business plan. But that's only a necessary part of the equation.
The equally important part is mobile devices. Netbooks and notebooks with embedded or USB dongle WiMAX will not create the mass market Clearwire and its partners need to succeed. Too much competition from free WiFi in developed countries, especially the U.S. Hand held devices with WiMAX interfaces are urgently needed. Forget about MIDs, which we don't expect to see until mobile broadcast TV is combined with Internet video in a hand held device. The WiMAX ecosystem needs devices like eReaders, smart phones, digital cameras, video recorders, mulit-user game players, smart meters, medical imaging instruments, mobile M2M gadgets, etc to entice subscribers. Without that, no amount of network infrastructure investment will result in a good ROI for Clearwire and its MVNO investors/partners.
Comment
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Comment by Alan J Weissberger on November 10, 2009 at 4:46pm
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Here's the official announcement in the on-line WSJ:
http://online.wsj.com/article/SB10001424052748703808904574527403245260602.html
Clearwire Reaches Deal to Raise $1.56 Billion
By NATHAN BECKER
Clearwire Corp. reached an agreement to raise $1.56 billion by selling new shares to several companies so it can continue the expansion of its high-speed, fourth-generation wireless network.
The company will sell shares at $7.33 apiece to Sprint Nextel Corp., Comcast Corp., Time Warner Cable Inc., Intel Corp., Eagle River Holdings LLC and Bright House Networks LLC. All are current Clearwire investors. Clearwire shares closed at $6.80 on Monday.
Related
Sprint, Partners to Pump $1.5 Billion Into Clearwire Sprint is Clearwire's majority shareholder and will buy the bulk of the new shares, contributing $1.18 billion. Sprint has bet heavily on Clearwire to provide 4G services, which Sprint has rolled out in select markets. Sprint's rivals have chosen other technology. The next-biggest investor is Comcast, at $196 million.
This capital infusion comes about 18 months after Sprint, Intel, Comcast and other partners put $3.2 billion into Clearwire, which is building the nation's first 4G mobile-broadband network.
Clearwire also announced plans to offer at least $1.45 billion in new debt so it can pay off its existing $1.4 billion credit facility.
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Comment by Basant Khaitan on November 9, 2009 at 4:52am - Uncertain, at best! You know the core issues. All eyes are on the Indian Government! I hear answers ranging from NEVER to CERTAINTY! I dont have any inside knowledge on either the industry or the government. I am mostly reacting to what I read occasionally.
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- Basant, What about prospects for WiMAX in India?
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Comment by Basant Khaitan on November 8, 2009 at 11:25pm
- Agree with your positon, Alan. A lot more funding is necessary for a credible widescale roll out and ecosystem as you described it. I am not sure if Cisco is the right company to make a bet on one specific service provider. Wall Street and VC meltdown does help WiMAX cause either. For right or wrong, WiMAX remains a question mark!
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