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Sprint (NYSE: S) and Clearwire (NSDQ: CLWR) have decided to re-up their partnership to the tune of $1 billion over the next three years, providing a life raft for Clearwire as the two companies managed to work out a dispute over the prices that Sprint will pay to use Clearwire’s 4G WiMax network.
Under the terms of the new agreement, Sprint has committed to spend a minimum of $1 billion in cash, including $850 million this year and next, in usage fees for Clearwire’s network. Clearwire, under new CEO John Stanton (whose title still carried the “interim” tag in Clearwire’s press release), could desperately use the cash as it tries to rebound following a trying year in which it continued to lose money following the huge expenses incurred while building out a wireless network. The agreement also resolves differences over how much Sprint would have to pay to allow customers using dual-mode 3G and 4G devices to access Clearwire’s network, although terms of the new wholesale pricing arrangement were not disclosed.
It’s a difficult partnership that once looked so promising, but Sprint and Clearwire have no choice but to stick together at this point. Sprint needs access to a next-generation network in order to compete against bigger players like AT&T (NYSE: T) and Verizon, which are building 4G networks based on a different technology, and Clearwire needs Sprint’s larger subscriber base to complement its own retail strategy.
But both are eyeing the potential AT&T/T-Mobile merger with trepidation, which may be why Sprint is talking about letting another wholesale wireless carrier, LightSquared, onto its network, according to the Wall Street Journal. Lightsquared uses the LTE 4G technology that AT&T and Verizon plan to use, giving Sprint a possible road map away from WiMax should Clearwire falter.