Sprint to pay Clearwire $1 billion in wholesale fees

Clearwire logo

Sprint and WiMax operator Clearwire have, at long last, announced a resolution to their pricing dispute over wholesale access to Clearwire’s 4G WiMax network: under terms of a new deal, the companies have amended their long-term agreement so that Sprint will be paying Clearwire a minimum of $1 billion for wholesale WiMax service during 2011 and 2012. The deal has Sprint paying at least $300 million in case for WiMax services in 2011, $550 million in 2012, and throwing in an additional $175 million in pre-payments for 4G WiMax services that can be used in 2011 or beyond.

The companies have also agreed to new pricing terms for devices that run on both Sprint’s 3G network and Clearwire’s 4G network that include minimum payments to Clearwire for every 4G-capable device sold. The companies have also agreed to mutual re-wholesaling rights, meaning Sprint can resell access to Clearwire’s 4G network, and Clearwire can resell access to Sprint’s 3G network, expanding market opportunities for both companies.

“Sprint has been our biggest and most important customer and partner since we launched 4G services in the U.S. more than two years ago,” said Clearwire Interim CEO John Stanton, in a statement. “Today’s agreement further aligns Sprint and Clearwire’s interests and lays the foundation for a continued, constructive relationship. We are pleased to have the resources and partnerships necessary to maintain our 4G leadership and leverage our significant spectrum and capacity for delivering mobile broadband services.”

Clearwire has been saying it expected an “imminent” resolution to its pricing disputes with Sprint since February; the companies have been in arbitration over the dispute since late 2010. In the meantime, Clearwire CEO Bill Morrow left the company in March, clearing the way for Clearwire chairman (and former Voicestream and Western Wireless exec) John Stanton to take the reigns while the company engages in a CEO search.

The agreement gives Clearwire a much-needed cash infusion: the company went through a round of layoffs and cost-cutting measures in November 2010 designed to keep the company operational through mid-2011; however, it’s not clear how much of a dent Sprint’s initial cash outlay will put in Clearwire’s outstanding debt and operational costs—and Clearwire is now facing heated competition from high-bandwidth LTE and HSPA+ services being deployed by other mobile carriers. And there’s another cloud on Clearwire’s horizon: the company has been accused of knowing overselling its services and then charging substantial cancellation fees when customers tried to back out.


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