Bloomberg News

Sprint Pares Clearwire Voting Interest to Less Than 50%

June 08, 2011

(Updates share prices in fifth paragraph.)

June 8 (Bloomberg) -- Sprint Nextel Corp., the third- largest U.S. wireless carrier, cut its voting stake in Clearwire Corp. to less than 50 percent to settle investor concerns that the partner may be considered a subsidiary.

The carrier told Clearwire on June 1 it pared its voting interest to 49.8 percent from 53.7 percent, according to a regulatory filing today. The move is a bid to quell any concerns that Clearwire’s debt would become a liability to Overland Park, Kansas-based Sprint.

“Sprint is proactively providing protection and flexibility with respect to its debt agreements and eliminating ongoing investor concerns about any potential cross-default risk,” Scott Sloat, a spokesman, said in an e-mailed statement.

Clearwire has struggled to meet its cash needs as it builds out its network using a technology known as WiMax. The company last year disclosed it had doubt about its ability to continue as a “going concern” before raising cash in a bond sale.

Sprint lost 15 cents, or 2.7 percent, to $5.34 at 4:15 p.m. in New York Stock Exchange composite trading. Clearwire declined 6 cents, or 1.5 percent, to $4.05 on the Nasdaq Stock Market.

Sprint has pledged as much as $5 billion to upgrade its network over the next three to five years to combine several disparate bands of spectrum onto a single type of base station. Kirkland, Washington-based Clearwire and Sprint have held talks about an arrangement to share network equipment.

Removing Risk

“With today’s announcement, this removes any concern about a cross-default risk -- which should allow Sprint to be able to be more opportunistic in the debt markets,” Jennifer Fritzsche, a Wells Fargo & Co. analyst in Chicago, said in a research note. She rates both Sprint and Clearwire “outperform.”

The voting change doesn’t affect Sprint’s equity stake in Clearwire or its relationship as a customer of the carrier, Sloat said. Sprint uses Clearwire’s wireless network to provide so-called fourth-generation service.

Mike DiGioia, a spokesman for Clearwire, said in an e-mail that the company doesn’t comment on the actions of its investors.

--Editors: Ville Heiskanen, Peter Elstrom

To contact the reporter on this story: Greg Bensinger in New York at gbensinger1@bloomberg.net

To contact the editor responsible for this story: Peter Elstrom at pelstrom@bloomberg.net


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