Sprint Nextel Corp. is talking with cable companies about a possible investment that may lead to an acquisition of partner Clearwire Corp. (CLWR), according to Bloomberg. Sprint and Comcast are already investors in Clearwire along with Time Warner Cable Inc. and Bright House Networks LLC.
The talk of a new round of investments or a complete acquisition is not new. And there is no question, but Clearwire needs a significant new round of investment. Sprint already has made a couple of major investments in Clearwire, most recently in 2009.
The size and timing of the investment in Sprint have yet to been determined, the people said. The discussions involve various scenarios, including a Clearwire buyout or an investment in the company through Sprint. Cox Communications Inc. and Cablevision Systems Corp. have also been in discussions with Sprint, Bloomberg said.
Another scenario involves Comcast and Time Warner Cable selling their Clearwire shares and so-called Advanced Wireless Services spectrum to Sprint in exchange for equity in Sprint.
Sprint and several of the major U.S. cable operators have invested together starting in 1994 in wireless ventures, though a fair assessment would be that not much has resulted from the ventures.
It is clear that with the likely AT&T purchase of T-Mobile USA, Sprint has to get bigger, and has to secure its spectrum and network asset position, which has been messy of late, with friction between Clearwire and Sprint business objectives.
There long has been speculation that Sprint ultimately would have to acquire the rest of Clearwire it does not already own. But some also have speculated that Sprint might wait until Clearwire equity lost value, making the acquisition more affordable for Sprint. That time might have arrived.
Clearwire traded at about $32.50 a share for a period in mid-2007. By the end of 2008 shares had dropped below $6 a share. At the end of 2010 shares were trading around $6 a share. In early August 2011 shares had dropped to less than $2, though prices have bounced back up on Aug. 19, 2011 in the wake of the takeover news.
Bonds of Clearwire Corp. are approaching levels consistent with an impending default as partner Sprint Nextel Corp. strikes a capacity deal with competitor LightSquared, Bloomberg says. Standard & Poor’s says Clearwire will run out of cash in 2012.
The unprofitable wireless broadband provider’s bonds have fallen 12 percent recently, the worst performer among junk- rated telecommunications companies in the U.S., Bank of America Merrill Lynch index data show. Its notes trade at an average yield of 15.2 percent, compared with 11.8 for CCC rated debt and 20.7 percent for CC, a grade that means a default is expected.
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Gary Kim is a contributing editor for MobilityTechzone. To read more of Gary’s articles, please visit his columnist page. 
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