Cricket Communications has signed a
five-year agreement with Clearwire for wholesale access to its unbuilt TD-LTE
network.
The deal will buoy Cricket’s own LTE service
and provide Clearwire with a second customer for its new network, still in the
planning stages.
“We believe this agreement with
Clearwire provides us with an attractive option to supplement our own LTE
build-out strategy and gives us the flexibility to access additional 4G
capacity where needed,” said Doug Hutcheson, president and CEO of Cricket
parent company Leap Wireless International, in a statement.
Cricket will use Clearwire’s service to
add capacity to its own LTE service, which has so far only gone live in Tucson,
Ariz. The network will be expanded to two-thirds of Cricket’s current network
footprint over the next two to three years and is expected to cover 25 million
people this year.
The prepaid provider had planned to use
LightSquared’s wholesale network to supplement its mobile broadband coverage,
but that strategy was thwarted by the FCC’s decision to block LightSquared from
moving forward over problems with GPS interference.
LightSquared’s failure left Clearwire in
a strong position as the country’s lone wholesale provider for mobile broadband
services.
Financial terms of the deal were not
disclosed. Macquarie Securities analysts Zach Horat and Kevin Smithen said in a
research note today that it “could result in a few hundred million dollars
per year” in incremental earnings for Clearwire.
“The key question is whether or not
Leap will prepay any of this usage in order to aid Clearwire in funding its LTE
network buildout over the next two years,” the analysts said.
They speculated that if Clearwire was
able to sign MetroPCS as its third wholesale LTE customer, it could become
self-funding some time next year.
Clearwire has needed a steady influx of
cash to stay afloat and has repeatedly raised money through debt offerings and
funding from Sprint, its largest shareholder and customer.
Clearwire’s top executive called the
contract with Cricket a “key step forward” for the business. Sprint
was Clearwire’s sole customer for the wholesale TD-LTE service before Cricket
signed on.
“This long-term partnership with
Cricket is a key step forward in the development of Clearwire’s wholesale LTE
business model,” said Erik Prusch, president and CEO of Clearwire.
Clearwire is still on the hunt for other
customers, Prusch said. “We plan to continue to actively seek new
opportunities to serve the needs of other 4G providers,” he said.
The bulk of Clearwire’s revenue comes
from Sprint, whose customers use Clearwire’s current WiMAX network for 4G
service. Sprint is building its own LTE network and is phasing out its use of
Clearwire’s WiMAX network, but will eventually use Clearwire’s planned TD-LTE
network to bolster its own capacity.
The addition of new wholesale customers
could put Clearwire’s finances on a more solid foundation and give it a degree
of independence from Sprint.
Clearwire has said it will have its
first 5,000 base stations on line by mid-2013 and will overlay its existing
WiMAX network with the new technology instead of going with a standalone
architecture.
The network will be what Clearwire calls
“LTE-Advanced-ready,” capable of supporting carrier aggregation technology that
will improve its efficiency and capacity.
