Officials of Sprint Nextel (News - Alert) say the company “faces problems” if Clearwire defaults on its loan agreements.

Accordingto industry observer Lynette Luna, Clearwire stated in a Securities and Exchange commission that “its continual losses and uncertainty over financing raises red flags about the WiMAX (News - Alert) operator's ability to continue operating.”

Industry observer Mark Davis writes that “Cash is running short at Clearwire (News - Alert) Corp., the company that is building the 4G network that Sprint Nextel Corp. uses to provide its fastest wireless service. Clearwire’s financial bind forced it to announce plans last week to lay off 15 percent of its work force, curb its marketing budget and cut other costs.”

Last week, Luna wrote, Clearwire announced it would take several measures to conserve cash as it seeks to secure new funding: “These measures include substantially decreasing its sales and marketing efforts, delaying smartphone launches, suspending operations in new markets and cutting 15 percent of its workers.”

The crisis has “also pushed Sprint into acknowledging that it could become responsible for Clearwire’s debts in certain circumstances,” Davis reports. “Sprint has said it does not control Clearwire though it owns 54 percent of the company based in Kirkland, Wash.”

Luna says “Clearwire has been searching for additional funding, and it appears Sprint, which owns 54 percent of the company, along with other investors such as Time Warner Cable and Comcast (News - Alert), aren't willing to put more money into Clearwire.”

Clearwire “could be considered a subsidiary under certain agreements relating to our indebtedness,” Sprint said in a filing with the Securities and Exchange Commission. “If viewed as a subsidiary, certain actions or defaults by Clearwire would result in a potential breach of (Sprint’s debt) covenants, including potential cross-default provisions.”