Bloomberg News

Sprint Prices $4 Billion Notes Offering, May Fund Clearwire

November 07, 2011

Nov. 5 (Bloomberg) -- Sprint Nextel Corp., the third- largest U.S. wireless operator, priced $4 billion of debt that it plans to use as it upgrades its network to higher-speed technology and offers customers Apple Inc.’s iPhone.

The company is issuing $3 billion of seven-year 9 percent notes and $1 billion of ten-year, 11.5 percent notes, Sprint said in a statement yesterday. The sale is expected to be completed Nov. 9.

The debt sale gives Sprint additional financing as it struggles to compete against larger rivals Verizon Wireless and AT&T. Sprint plans to upgrade its network to a wireless technology called Long-Term Evolution, or LTE, and last month began selling the iPhone, which the carrier subsidizes upfront to garner future service revenue.

Sprint also said it may use proceeds from the notes offering to help financing partner Clearwire Corp., the unprofitable wholesale wireless carrier. Money from Sprint would allow Kirkland, Washington-based Clearwire to fund its operations and help pay for a planned network upgrade.

“The fact that funding Clearwire is mentioned as a possible use of proceeds suggests the companies are moving in the right direction,” Jonathan Chaplin, an analyst at Credit Suisse in New York, said in a note to investors. He rates both Sprint and Clearwire shares “outperform.”

Clearwire said this week it has capital for 12 months and that its future may depend on Sprint, with which it is in talks for a new wholesale agreement. Sprint had previously signaled that it wouldn’t provide Clearwire with financial backing.

Clearwire gained 8 percent to $1.89 yesterday. The shares have lost 63 percent this year on concern that the company will run out of money.

Positive for Sprint

The debt sale is a positive for Sprint because it shows that the company has access to capital markets, Chaplin said. Sprint said last week it plans to refinance $4 billion of its debt and seek as much as $3 billion in financing from suppliers.

Sprint shares rose 2.1 percent to $2.87 yesterday. The company also had its credit rating cut further into junk by Standard & Poor’s because of costs related to a planned network upgrade.

Sprint said proceeds from the sale of the seven- and 10- year notes will be used “for general corporate purposes, which may include, among other things, redemptions or service requirements of outstanding debt, network expansion and modernization and potential funding of Clearwire,” according to a company statement.

Leigh Horner, a Sprint spokeswoman, declined to comment beyond the statement. Mike DiGioia, a Clearwire spokesman, also declined to comment.

--Editors: Ville Heiskanen, Peter Elstrom, Pierre Paulden

To contact the reporter on this story: Sarah Frier in New York at sfrier1@bloomberg.net

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


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