Sprint today agreed to pay Clearwire $1 billion for the right to wholesale access to its WiMAX network over the next two years.
Sprint Tuesday agreed to pay Clearwire $1 billion for the right to wholesale access to its WiMAX network over the next two years.
Under the new agreement, Sprint will pay Clearwire a minimum of $300 million in 2011 and $550 million in 2012 for wholesale rights. Sprint will also pony up $175 million in "pre-payments for wholesale services" that will be used in both 2011 and 2012.
Sprint, which is a 54% owner of Clearwire, has been haggling for months over what it will pay the company for wholesale rights. This has come at a time of significant turbulence for Clearwire, as the company acknowledged late last year that it would need a large capital injection in order to remain solvent this year.
ANALYSIS: Can Clearwire escape financial doom?
Clearwire's operating expenses have soared over the past three years, going from $514 million in 2008 to $1.5 billion in 2009 to $2.8 billion in 2010. The company says that the vast majority of its capital expenditures over the past three years were incurred from network build-outs that have helped Clearwire bring its WiMAX services to every major market in the U.S. Even so, Clearwire's revenue has failed to keep up with the increased operating costs, resulting in a $2.3 billion loss in 2010, nearly double the $1.25 billion loss posted in 2009.
These dire numbers led the company to project that it does not expect to see any positive cash flows over the next year and that its cash would be depleted as soon as mid-2011 if it failed to raise any additional capital. In announcing its third-quarter financial results last year, the company said it would save money by letting go of 15% of its workforce and that it would enact plans to raise short-term capital to stay solvent.
Former Clearwire CEO Bill Morrow announced that he would be leaving the company last month, citing "personal reasons" for stepping down. Clearwire also announced that its Chief Commercial Officer Mike Sievert and its CIO Kevin Hart were leaving the company last month to "pursue other opportunities." The company is currently headed by interim CEO John Stanton, who had served as chairman prior to Morrow's resignation.
Clearwire and Sprint first formed a joint WiMAX venture in 2008, when they secured $3.2 billion in total investments from several major tech and communications companies, including Google, Intel, Comcast, Time-Warner Cable and Bright House Networks. Since then Clearwire has worked to build out a nationwide network that spans all major U.S. markets and that covers 120 million points of presence. The majority of Clearwire WiMAX customers get their access wholesale from third-party providers such as Sprint, Comcast and Time-Warner Cable.