Sprint Throws Clearwire a Lifeline, We Think

Ok, this morning along with their earnings report, Sprint’s CEO Dan Hesse also disclosed a tentative, non-binding agreement with Clearwire. The two will work together on Clearwire’s LTE buildout, extending the companies’ relationship beyond the end of 2012 when Sprint said a few weeks ago it would stop selling WiMAX devices and build its own LTE.  The whole thing is a bit fuzzy yet, which the astute will surely have derived from the words ‘tentative’ and ‘non-binding’.  Sprint has not yet agreed to fund Clearwire’s buildout, but they are obviously trying to piece something together.

Investors reacted badly to Sprint’s apparent willingness to go it alone and dump Clearwire entirely, but really what we are seeing is a multi-step realignment taking place. Individually each step makes no sense, but in the end it seems obvious that Sprint’s LTE buildout will leverage Clearwire’s as well as LightSquared’s eventually.  They’re not throwing away their investment, rather the ownership structure is forcing them to take the mess apart before putting it back together.

But it’s not yet back together of course, and thus there remains substantial uncertainty.  Sprint’s announcement of a rather useless non-binding agreement is simply a way to tell the market what’s coming next, since obviously nobody understood the last step at all and they took a lot of heat for it.

Clearwire’s stock is naturally up in response – what else could it possibly do?  Last week they had been cast adrift out of sight of land.  Today they’re being towed again though nobody knows where.  Hopefully this soap opera will wrap up by the end of the year.

Sprint still needs to raise substantial funds to make their revamped 4G future happen, and I still think that selling the wireline business could be a big part of that plan.

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Categories: Wireless