Clearwire’s (CLWR) dance with financial disaster could be getting more heated as The Wall Street Journal is reporting the carrier could miss a Dec. 1 financing payment. The news sent Clearwire’s stock down more than 20% in late Friday trading to less than $1.50 per share.
Citing an interview with recently installed CEO Erik Prusch, the report notes the $237 million payment could be a significant drain on the company’s current cash position of less than $700 million.
“It’s a very expensive payment that we have,” Prusch said in an interview with the Wall Street Journal. “It would be a significant drain of our cash, so we have to evaluate everything in terms of our decision of where we’re going.”
In a statement to RCR Wireless News, Clearwire spokeswoman Susan Johnston states: “The company is not going to comment on the WSJ’s story. Clearwire does not comment on speculation. The company remains focused on growing its wholesale and retail business, and raising additional funds.”
Several analyst firms that have a stake in Clearwire downplayed the possibility, noting that the comments were taken out of context and that the carrier is close to finalizing a new long-term deal with parent company Sprint Nextel that would help alleviate a financial shortfall.
“We had an opportunity to speak with [Clearwire] management on this issue and believe that these quotes were taken out of context and were more in reference to the question as to why investors are focused on this debt payment,” noted Wells Fargo Securities in a report. “It is our understanding that when asked the question of whether the interest payment would be made, [Clearwire’s] CEO answered that the company would not comment on this issue. This is consistent with what [Clearwire] had said on its Q3 2011 earnings call and our TMT conference just last week. Put simply, this is not new news.”
“We expect that [Sprint Nextel] will inject [$500 million to $600 million] into [Clearwire by year-end at the latest in the form of a prepayment or loan,” noted Macquarie Securities in a report. “And that [Sprint Nextel] has decided to allow [Clearwire] to either sell spectrum or equity to other carriers in order to satisfy its liquidity requirements. We think that [MetroPCS] is the most likely new strategic partner for [Clearwire].
Sprint Nextel, which owns a controlling stake in Clearwire, has repeatedly stated the importance of Clearwire to its next-generation network plans, though there has recently been some concern regarding that relationship. Clearwire holds a substantial portfolio of spectrum assets in the 2.5 GHz band, which in some markets is nearly 150 megahertz.
Sprint Nextel earlier this year agreed to pay at least $1 billion to Clearwire over the next several years for wholesale services related to Sprint Nextel’s “4G” offering. Clearwire has also aggressively implemented cost-cutting initiatives including terminating a backhaul deal with FiberTower, turning over network management to Ericsson and cutting some of its workforce.
Clearwire has stated plans to freeze expanding its current WiMAX network in favor of plans to begin installing LTE technology, though it was looking for at least $600 million to help fund the deployment.
Bored? Why not follow me on Twitter?
