Sprint says it has no plans to acquire Clearwire and is considering ways to reduce its liability for Clearwire’s financial problems, which have threatened the WiMAX operator’s ability to stay afloat.
In a statement issued late yesterday afternoon, Sprint said it is in discussions with Clearwire about further investments but has “no plans at present” to acquire the company. Sprint already holds 54 percent of Clearwire’s shares.
Sprint has taken steps to mitigate the risk caused by Clearwire’s precarious financial position by amending its equity agreement with Clearwire to allow it to reduce share of voting securities below 50 percent, it said. Sprint said last month that it was looking at ways to “eliminate the potential for Clearwire to be considered a subsidiary of Sprint.”
Sprint said lowering its percentage of voting shares in Clearwire gives it the “additional flexibility to avoid any risk that Sprint incurs a default under its debt agreements because of its voting interest in Clearwire.” Sprint’s economic interest in Clearwire would not be affected if it decides to surrender its voting shares, it said.
Sprint has been concerned that its stake in Clearwire could expose it to considerable financial risk if Clearwire defaults on its loans. Clearwire said in a November SEC filing that its losses and funding problems “raises substantial doubt about our ability to continue as a going concern.”
Clearwire said earlier this month it was planning to raise more than $1.1 billion in a debt offering to resolve its near-term funding issues, which have forced the company to cut 600 jobs and delay the launch of Clear-branded smartphones. The company has so far completed its debt offering without help from Sprint, which has until Jan. 2, 2011, to decide whether to exercise its pre-emptive rights to buy up to its pro-rata share of exchangeable notes. Sprint said it hasn’t decided whether to take part in the debt offering.
Clearwire is also pushing forward with an auction of its excess spectrum and is still looking for new investors, company CFO Erik Prusch said at a recent investor conference.