4G Provider Clearwire Sells $1.3 Billion of Debt, Feels More 'Comfortable'
Clearwire, working to secure funding to continue the build-out of its WiMax-based 4G network, sold more than $1.3 billion in debt, the company announced in a Dec. 6 statement.
Clearwire, which wireless carrier Sprint owns a majority stake in, has said it plans to cover 68 U.S. markets and 120 million people by year's end. However, even after this latest sale, reports Reuters UK, it still needs "billions of dollars more funding" to complete construction on the network.
In a Dec. 3 talk at the JP Morgan SMid Cap Conference, Clearwire CFO Eik Prusch said that while the financing, composed of three parts - a first lien of $175 million, a second lien of $500 million and a $650 million sale of 8.25 percent exchangeable notes due in 2040 - totaled approximately $1.3 billion, "the follow-on could be as much as $880 million."
Prusch added that Clearwire is still searching of money to continue the build-out, and that the company has "always expected some combination of deals, and this satisfies one of the deals." To save money, he said Clearwire has cut back on its number of contractors, delayed deployments in Denver and Miami and deferred the launch of some 4G smartphones.
After a USB investor conference, Prusch told reporters that Clearwire is halfway through its spectrum auction and is looking to find "up to $2 billion from a sale," UK Reuters reported Dec. 6, though it's still not clear whether Clearwire will look for equity funding and a spectrum sale.
"The question is whether we close either or both," he said, according to UK Reuters. While Clearwire, and with it Sprint, have been first out of the gate with 4G, Verizon joined the race Dec. 5, with the launch of 38 metropolitan markets and 60 commercial airports. By the end of 2012, it plans to offer 4G LTE (long-term evolution) technology across its entire 3G footprint.
"We have a $20 billion annual wireless business," Verizon CFO John Killian said during the carrier's third-quarter earnings call. "It's hard to describe that as 'early innings,' but we still believe it's the early innings of the data explosion."
T-Mobile is also getting in on the explosion. Though its network is based on HSPA+ technology, and not yet LTE, executives say the network offers comparable speeds and on Nov. 2 launched an ad campaign calling itself "America's largest 4G network," as well as launching the 4G-enabled myTouch 4G smartphone.
Though Sprint has somewhat distanced itself from the struggling Clearwire, its 4G offering through the company has helped the carrier to post some of its best quarters in years. "We are in a hyper-competitive industry, with strong, capable competitors, so making progress is hard work," Sprint CEO Dan Hesse said during an Oct. 27 earnings call. "But we intend to persevere."
The message appears to be the same one coming from Clearwire executives.
"We're comfortable about where we're going to be at the end of the year," Clearwire's Prusch said at the JP Morgan event. "Certainly this gives us plenty of new flexibility."