Clearwire (NSDQ: CLWR) cleared one big hurdle when it closed its merger with Sprint (NYSE: S) Nextel, but it is far from being out of the woods, reports the Wall Street Journal. The problem is that Clearwire hopes to beat Verizon Wireless (NYSE: VZ) and AT&T (NYSE: T) at building out a 4G network by at least two years, but analysts doubt it will be able to raise the billions more needed to keep up such an aggressive pace. In addition to the $3.2 billion the company raised recently, analysts suspect the Kirkland, Wash.-based operator will need another $3 billion to $5 billion to complete its network. Ben Wolff, Clearwire’s CEO, has said it once, and told the WSJ again that the company has the option of slowing down its build schedule if the funds don’t become available, “or we could be more aggressive and we’d have to look to acquire more debt or equity in either late 2009 or early 2010.”
Slowing the company’s growth might be the riskiest thing it can do because it gives competitors a chance to catch-up. Both AT&T and Verizon Wireless have committed to using LTE, a technology that has yet to be fully baked through the standards process, but is on the fast track with Verizon hoping to have its first network up and running by the end of 2009. Chris King, a telecom analyst at Stifel Nicolaus: “The question is, how much of a time advantage are they actually going to have.”
But I would argue that Clearwire may have a third option not being discussed. Besides raising cash, or slowing growth, Clearwire potentially could pursue another scenario — and it’s something that Clearwire’s founder Craig McCaw has done before. Back when he was trying to get Nextel Communications off the ground, the struggling company ran out of cash, and all of its lending options. So, McCaw essentially outsourced the build-out in rural areas to an affiliate. Called Nextel Partners, the company was able to raise funds independently and build a network using spectrum that Nextel gave it. The end result gave Nextel Communications a bigger footprint faster than it could have done on its own without having to raise more cash.
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