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Clearwire, the struggling US wireless broadband network operator, plans to raise at least $595m in stock offerings as it seeks to bolster its balance sheet ahead of a planned network upgrade.
The equity sale represents the latest step in a financial turnround plan for Clearwire which announced a key extension of its network sharing agreement with Sprint Nextel last week, expected to be worth up to $1.6bn to Clearwire over the next four years.
Clearwire will offer $300m of its class A common stock in a public offering and expects to grant the underwriters a 30-day option to purchase up to another $45m of stock.
Separately, Sprint Nextel, the third-largest US mobile network operator and the owner of a 54 per cent stake in Clearwire, will purchase $295m of Clearwire’s class B common stock.
The new funds will help Clearwire upgrade its existing WiMax network to accommodate another more popular 4G technology called LTE, which all the major US network operators plan to deploy.
Michael Nelson, an analyst with Mizuho Securities, said that the equity funding was the logical next step in Clearwire’s turnround. “This really is the final piece of the puzzle for Clearwire,” he said, “it’s enough to fulfil the near-term funding requirement and enough to build out the LTE network.”
Speaking at a UBS investor conference in New York this week, Joe Euteneurer, Sprint’s chief financial officer, said elements of the agreement were designed to support Clearwire’s LTE rollout. He also confirmed that Sprint will offer its customers dual mode smartphones beginning in the third quarter next year that will be able to operate on both Sprint’s and Clearwire’s LTE infrastructure.
Sprint is building its own LTE network in order to compete with Verizon Wireless and AT&T, the market leaders. Sprint currently relies on Clearwire’s slower WiMax network to provide mobile broadband services to its customers. It will use the network, in addition to its LTE service, until at least 2015, while Clearwire builds its own LTE network in its largest markets.