Clearwire’s financial announcement Monday morning seemed innocuous enough: The underwriters of its $350 million stock offering are exercising an option to purchase another $52.5 million in shares. That’s hardly big money in the world of telecom finance, but what the release doesn’t tell you is that with the option, the value of Clearwire’s public offering now breaks the $400 million mark. And $400 million is the magic equity number that triggers a big investment by Sprint and marks the beginning of Clearwire’s LTE rollout.
If the offering is successful, Sprint will kick in as much as $347 million to maintain its current 49.6 percent ownership stake in the WiMAX operator. Clearwire has said it would use those funds for any number of housekeeping items, including operations and maintenance, but the big-ticket item on its to-do list is its planned LTE network. Clearwire has said it needs $600 million in new capital to get its time division LTE (TD-LTE) launch off the ground, so the majority of that investment will almost certainly go toward a massive infrastructure build.
Clearwire plans to overlay TD-LTE in all of its WiMAX markets, which currently covers 132 million people in 72 markets, deploying the network in hot zone clusters. That hardly gives Clearwire a nationwide network, but if it meets certain coverage targets, Sprint has agreed to provide more funding, which Clearwire could use to launch the second phase of its rollout. Given the problems Sprint’s other LTE partner LightSquared is having with regulators, Sprint has even more incentive to ensure Clearwire gets its network built.