Sprint's solo LTE plan ignores Clearwire assets

07.10.2011
Shares of Sprint Nextel and Clearwire plummeted on Friday after Sprint laid out plans to build its own LTE network, leaving the ailing Clearwire alone to fund and build LTE itself.

At an event in New York, Sprint said it was building an LTE (Long-Term Evolution) high-speed mobile data network that would and reach about 250 million U.S. residents by early 2014. The LTE service would use the flexible network that Sprint plans to build with Ericsson under its Network Vision initiative. Sprint has said the initiative will cost US$4 billion to $5 billion and it will have to raise additional funds at some point.

But the plan had no place for Clearwire, which currently provides the 4G service for Sprint subscribers over its WiMax network. Sprint bypassed Clearwire even though it owns a majority of the company, which was formed as a joint venture in 2008.

Clearwire's stock (Nasdaq: CLWR) plunged $0.66, or 32 percent, to hit $1.39 by the end of the day Friday. Sprint (NYSE: S) didn't fare much better, losing $0.60, or nearly 20 percent, hitting $2.41.

Clearwire sells WiMax under its own brand and through cable operators, but Sprint is by far its biggest customer and also provides the 3G service that is critical for all users of the WiMax network to enjoy broad national coverage. Sprint said Friday that it will keep to a wholesale deal the companies reached earlier this year, under which through the end of 2012 for access to WiMax. The company will also keep selling WiMax devices through next year and support them even longer. But Sprint made no further commitments to Clearwire.

Without Sprint, Clearwire could be in a precarious position, said analyst Monica Paolini of Senza Fili Consulting. When Clearwire earlier this year, the company said it would need to raise $600 million to build the LTE network alongside its WiMax system.