Sprint gives up majority vote at Clearwire
- — 10 June, 2011 05:50
Sprint Nextel has given up its majority voting power at Clearwire to defuse investors' concerns about the danger to Sprint if Clearwire defaulted on its debt.
Sprint, which resells Clearwire's WiMax mobile broadband service under its own brand, kept all of its economic interest in the company, of which it owns 54 percent of the stock.
Clearwire continues to rack up losses after building out a national WiMax network that reaches 120 million potential subscribers. It has taken several steps to cut costs and assured financial analysts at the time of its last earnings report in May that it had enough cash and investments to continue operating for another year. But Sprint sought to ease investor worries about the impact on Sprint if Clearwire were to default on its debt.
According to a filing to the U.S. Securities and Exchange Commission on Wednesday, Sprint notified Clearwire that it would surrender some of its Class B voting stock in the company. The move will reduce Sprint's proportion of the voting stock from 54 percent to 49.8 percent, according to the filing. The voting shares have only nominal financial value. Sprint will keep its 54 percent financial ownership in the company.
"By taking this action, Sprint is proactively providing protection and flexibility with respect to its debt agreements and eliminating ongoing investor concerns about any potential cross-default risk," Sprint spokesman Scott Sloat wrote in an e-mail message.
Clearwire was formed in 2008 as a joint venture between the former Clearwire company and a group of investors including Sprint, Intel, Google, Comcast, Time Warner Cable and Bright House Networks. While Clearwire built out the network, Sprint and the cable companies have resold access to it. But the future of fast wireless among the companies may become more complicated, with both Clearwire and Sprint showing interest in LTE (Long-Term Evolution), which might be deployed in addition to or as a replacement for WiMax in the coming years.
Sprint and Clearwire recently completed a wholesale agreement after months of negotiations, under which Sprint will pay Clearwire about $1 billion over the next two years for its subscribers' use of the WiMax network. The two companies still have a productive working relationship, Sprint said on Wednesday.