Shares of Clearwire plummet after Sprint inks deal with LightSquared

Shares of Clearwire sank nearly 20 percent this morning after Sprint inked a network hosting deal with LightSquared valued at $9 billion over the next 15 years. Sprint owns a majority share of Clearwire, but its anticipated alliance with LTE network provider LightSquared could signal a big shift away from the WiMax technology used by Clearwire.

“This spectrum hosting agreement with LightSquared allows Sprint to more efficiently use its Network Vision platform,” said Steve Elfman, president of Network Operations and Wholesale for Sprint. “In addition to improving our cash flow, it provides additional options and flexibility in how we meet our customers’ future capacity needs.”

But is that deal the death knell for Clearwire?

In a conference call this morning, Sprint noted that the “transaction has no impact on Clearwire.” And Sprint CEO Dan Hesse tells Fierce Wireless that Sprint could enter into a similar network hosting deal with Clearwire,

But analysts (and Wall Street) aren’t so sure, according to Barron’s.

In a research note this morning, Jamie Townsend with Townhall Research said that the partnership between Sprint and LightSquared is “further evidence of Sprint’s intent to shift away from Clearwire as its long term 4G solution.”

“We do not expect any immediate change in the relationship between Sprint and Clearwire but continue to believe that the longer term outlook for Clearwire is bleak,” he wrote.

In a statement sent to GeekWire this morning,  Clearwire said:

“As the company that deployed the nation’s first 4G network, and as the largest 4G wholesaler in the world, Clearwire understands better than anyone the numerous technical and financial hurdles that must be overcome by any new service provider. We fail to see how the agreement announced today solves any of the significant problems facing LightSquared, such as its lack of usable spectrum for a 4G LTE network, its significant technical and regulatory problems, and its need to raise billions of dollars in additional funding to cover its obligations to Sprint. We expect to have additional information as a part of our quarterly earnings announcement next week.”

  • Victor

    We can expect a chapter 11 filing soon.

  • Bill

    Even if Clearwire is correct, it does not stop the fact that Clearwire still needs huge amounts of investment capital to continue building out its network.  No way that Sprint or public investors provide that capital now. If Clearwire goes bankrupt, perhaps LightSquared would get its spectrum from buying the Clearwire assets although I would guess the bidding would be intense on their portfolio.