Sprint Nextel, Clearwire attempt to clear the air

With executive-level representatives from both companies speaking at this week’s Citi 21st Annual Global Entertainment Media & Telecommunications Conference, there was little doubt one of the topics of discussion would be the current temperature of the relationship between Sprint Nextel Corp. (S) and Clearwire Corp.(CLWR)
Despite Sprint Nextel maintaining its majority ownership stake in Clearwire, and being reliant on Clearwire for its WiMAX-based “4G” service, recent comments and movements by both players has the investment community on edge. Those movements include Sprint Nextel’s refusal to partake in Clearwire’s recent debt offering, Sprint Nextel changing its personal on Clearwire’s board and disagreements over Clearwire’s focus.
Sprint Nextel CEO Dan Hesse noted that the carrier’s decision to decline to participate in Clearwire’s recent debt offering was a simple business decision and that nothing deeper should be read into that decision.
“Clearwire is our 4G strategy,” Hesse reiterated. “We will continue working with them going forward.”
Clearwire’s CFO Eric Prusch downplayed Sprint Nextel’s refusal to participate noting Clearwire had anticipated the move and that the decision would not have any impact on the relationship or board positions.
“We are mutually dependant,” Prusch noted, adding that Sprint Nextel continued to control 54% of Clearwire.
Hesse also clarified Sprint Nextel’s recent decision to update its network operations was done solely to enhance the carrier’s ability to utilize its assets, though he did note that one of the benefits of the new network architecture was that once completed it would allow for easier network sharing of those assets. This was brought up as the carrier made several mentions to the new network equipment being able to handle spectrum up to the 2.5 GHz band, which is being used by Clearwire for its network roll out.
“This was something we could not do before,” Hesse added.
Prusch noted the network enhancements being undertaken by Sprint Nextel would provide another possibility for Clearwire in its move to expand its network reach and depth, but that a decision on that possibility has not yet been reached.
As for any plans for LTE, Hesse said the technology could play a role in the future for either Sprint Nextel or Clearwire, but that the carrier was comfortable with the current WiMAX road map. Clearwire is currently testing LTE technology in its Phoenix market as a possible offering to run side-by-side with its WiMAX service.
The two carriers are still embroiled in a revenue dispute regarding how much Sprint Nextel is to pay to Clearwire for the sale of WiMAX-enabled devices. Prusch said Clearwire was anticipating the payment would go from its current $4 per month per device to $9, though if an agreement between the two parties is not reached the dispute would go to an arbitrator.
Tiered pricing on the way?
One topic not associated with Clearwire that Hesse also spoke of was Sprint Nextel’s current view of so-called unlimited rate plans for mobile devices. The carrier has continued to provide for unlimited data transfer on its smart phone and feature phone rate plans while many of its competitors have instituted tiered plans that cap usage at a certain level.
Hesse noted that while Sprint Nextel is focused on keeping its offerings simple and unlimited for consumers, the carrier was leaning towards making adjustments “upward” in regards to the pricing in an attempt to help recover the costs needed to support higher usage.
Funding plans
While it recently managed to raise $1.1 billion in its debt offering, Clearwire said it was still in a cost conversation mode. The carrier is still looking to raise additional funds to support network expansion by possibly selling off some of its excess spectrum or by bringing additional partners into the operations.
As for its ongoing spectrum auction, Prusch refused to divulge the interested parties, but did note that the carrier was “rounding third base” in the proceedings and that a final decision on the matter should be announced shortly.