Sprint and Clearwire Sign Binding Network Deal

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on December 2, 2011  

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Clearwire Corp. and Sprint Nextel have concluded a new deal that resolves their protracted struggle, which had threatened to push Sprint into bankruptcy. Disagreements between the two partners had flared up on the issue of wireless service. Sprint relies on Clearwire for high-speed wireless service, and Clearwire relies on Sprint for monetary funding. But recently, issues over financial commitments, business strategies and wireless service deals had caused rifts between the two.

Under the new four-year deal disclosed Thursday, Sprint will pay Clearwire upwards of $1.6 billion in network fees and other investments. The deal alleviates investor fears that Sprint was looking to distance itself from Clearwire after 2012 as Sprint is building its own independent high-speed network. The deal was released the same day that Clearwire was scheduled to make a $237 million interest payment, one, which many feared that the company could not afford and which would have pushed the company into a restructuring. But Clearwire revealed on Thursday that it indeed has made the payment.

“We should take comfort that not only have we identified additional funding, we’ve extended the relationship with Sprint, we’ve got a commitment to LTE,” Clearwire Chief Executive Erik Prusch said in an interview.

The deal also ensures that Sprint will pay Clearwire $926 million for unlimited use of Clearwire’s WiMAX network through 2013 and also pay $350 million for access to Clearwire’s LTE network, giving Clearwire a much-needed financial boost. For Sprint, unlimited access to the network will allow it to sell low-cost smartphones connecting to the LTE network. The deal, which is beneficial to both companies is seen as a strengthening of the relationship between the two, at least until 2015, when the deal will expire.

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