Clearwire To Sell $1.56 Billion Of Stock To Expand 4G Network
DOW JONES NEWSWIRES
Clearwire Corp. (CLWR) has in place an agreement to raise $1.56 billion of
capital by selling new shares to several companies so it can continue the
expansion of its high-speed 4G wireless network.
The company will sell shares at $7.33 apiece to Sprint Nextel Corp (S),
Comcast Corp. (CMCSA), Time Warner Cable Inc. (TWC), Intel Corp. (INTC), Eagle
River Holdings LLC and Bright House Networks LLC. All are current Clearwire
investors.
Clearwire shares closed at $6.80 on Monday and lost 1.2% to $6.72 in premarket
action Tuesday.
Sprint, which is Clearwire's majority shareholder and has bet heavily on the
company to provide its 4G services that have been rolled out in select markets
while rivals have gone with other technology, will buy the bulk of the new
shares, contributing a total of $1.18 billion. The next-biggest investor is
Comcast at $196 million.
Shares of Sprint Nextel dropped 4.4% to $3.28 premarket.
This capital infusion comes about 18 months after Sprint, Intel, Comcast and
other partners first put $3.2 billion into Clearwire, which is building the
nation's first 4G mobile broadband network.
Clearwire also announced plans to offer a minimum of $1.45 billion in new debt
so it can pay off its existing $1.4 billion credit facility.
-By Nathan Becker, Dow Jones Newswires; 212-416-2855; nathan.becker@
dowjones.com;
(Updates with additional background)
By Roger Cheng
Of DOW JONES NEWSWIRES
NEW YORK -(Dow Jones)- Clearwire Corp. (CLWR) tapped its major backers for $
1.56 billion to cover its funding gap, enabling the company to continue work on
building out its next-generation wireless network.
The company will sell shares at $7.33 apiece to current shareholders Sprint
Nextel Corp. (S), Comcast Corp. (CMCSA, CMCSK), Time Warner Cable Inc. (TWC),
Intel Corp. (INTC), Eagle River Holdings LLC and Bright House Networks LLC.
Sprint, which is the majority stakeholder, will put in the lion's share with $
1.18 billion.
The funding was originally reported by The Wall Street Journal.
The investors each have a stake in the success of Clearwire's WiMax
technology, which is a long-range cousin to Wi-Fi Internet access. Sprint
depends upon Clearwire for its fourth-generation, or 4G, strategy, and is
betting its availability now will give it an edge against its rivals. The cable
providers want a wireless network to bundle with their own traditional services,
and Intel is betting that WiMax-powered chips will drive laptop sales like Wi-Fi
did.
"We view this as positive for Clearwire," said Michael Nelson, an analyst at
Soleil/Nelson Alpha Research. "However, we have significant concerns regarding
Clearwire's business model and cash burn in the face of a weak macro
environment."
Clearwire has been seeking financing to meet the high costs related to the
build-out of its wireless network, looking at its backers as well as outside
investors. The company is slowly rolling out the service on a market-by-market
basis.
The rest of the U.S. wireless industry is migrating to a rival 4G technology
called Long-Term Evolution, but it will lag WiMax. Verizon Wireless, which is
jointly owned by Verizon Communications Inc. (VZ) and Vodafone Group Plc (VOD),
is expected to roll out the first network next year, while WiMax is already
available in a handful of cities.
As part of the offering, Comcast will chip in $196 million, Time Warner Cable
$103 million, Intel$50 million, Eagle River $20 million and Bright House $19
million.
Separately, Clearwire plans to offer at least $1.45 billion in debt to pay off
its existing $1.4 billion credit facility. Through a deal with Sprint and
Comcast, which are also debt holders, Clearwire will be able to effectively
raise an additional $240 million in capital. It also expects to expand its
future borrowing capacity.
This capital infusion comes about 18 months after Sprint, Intel, Comcast and
other partners first put $3.2 billion into Clearwire.
Clearwire plans to release its third-quarter results after the bell Tuesday.
In recent trading, Clearwire rose 1.7% to $6.92, Sprint fell 4.1% to $3.29,
Comcast fell 1% to $15, Time Warner Cable rose 1.1% to $42.57, and Intel rose 1%
to $19.65.
-By Roger Cheng, Dow Jones Newswires; 212-416-2153; roger.cheng@dowjones.com
(Updates with third-quarter results and executive comments throughout.)
By Roger Cheng
Of DOW JONES NEWSWIRES
NEW YORK -(Dow Jones)- Clearwire Corp. (CLWR) said Tuesday it narrowed its
third-quarter loss and secured $1.56 billion in additional funding from its
major backers, enabling the company to continue work on building out its WiMax
wireless network.
The company will sell shares at $7.33 apiece to current shareholders Sprint
Nextel Corp. (S), Comcast Corp. (CMCSA, CMCSK), Time Warner Cable Inc. (TWC),
Intel Corp. (INTC), Eagle River Holdings LLC and Bright House Networks LLC.
Sprint, which is the majority stakeholder, will put in the lion's share with $
1.18 billion. The capital infusion comes about 18 months after the group first
put $3.2 billion into the company.
Clearwire shares fell 1.4% to $7.15 in after-hours trading.
The funding was originally reported by The Wall Street Journal.
The investors each have a stake in the success of Clearwire's WiMax
technology, which is a long-range cousin to Wi-Fi Internet access. Sprint, which
merged its WiMax operations with Clearwire in December, depends upon the company
for its fourth-generation, or 4G, strategy, and is betting its availability now
will give it an edge against its rivals. The cable providers want a wireless
network to bundle with their own traditional services, and Intel is betting that
WiMax-powered chips will drive laptop sales like Wi-Fi did.
"We view this as positive for Clearwire," said Michael Nelson, an analyst at
Soleil/Nelson Alpha Research. "However, we have significant concerns regarding
Clearwire's business model and cash burn in the face of a weak macro
environment."
Clearwire, meanwhile, posted a loss of $82.4 million, or 43 cents a share,
from a loss of $137.6 million a year ago, when Clearwire and Sprint's WiMax
business were separate. On a pro forma basis, the company's loss widened by 13%.
Revenue rose 13% to $68.8 million.
Analysts polled by Thomson Reuters expected a loss of 43 cents on revenue of $
67 million.
The company added 44,000 net new customers to bring its base to 555,000. The
company's turnover rate, known as churn, ticked up slightly because it held off
on promoting in markets where it offers a so-called pre-WiMax wireless
connection.
Clearwire has been seeking financing to meet the high costs related to the
build-out of its wireless network, looking at its backers as well as outside
investors. The company is slowly rolling out the service on a market-by-market
basis.
The company may still need additional financing next year, Chief Financial
Officer Eric Prusch told analysts during a conference call. He added that the
improved balance sheet gives it flexibility to seek future financing. It
continues to target covering 120 million people with its network by the end of
next year.
The rest of the U.S. wireless industry is migrating to a rival 4G technology
called Long-Term Evolution, but it will lag WiMax. Verizon Wireless, which is
jointly owned by Verizon Communications Inc. (VZ) and Vodafone Group Plc (VOD),
is expected to roll out the first network next year, while WiMax is already
available in a handful of cities.
Clearwire, however, doesn't see a major battle shaping up.
"We don't have to unseat the giant telcos to be successful," said Chief
Executive William Morrow. "We'll gain our fair share of the market."
As part of the offering, Comcast will chip in $196 million, Time Warner Cable
$103 million, Intel$50 million, Eagle River $20 million and Bright House $19
million.
Google Inc. (GOOG), which was a major backer in the first round, sat out the
latest funding. Morrow said Google continues to support Clearwire, and added
that investors shouldn't read anything negative into Google's opting not to make
another investment.
Separately, Clearwire plans to offer at least $1.45 billion in debt to pay off
its existing $1.4 billion credit facility. Through a deal with Sprint and
Comcast, which are also debt holders, Clearwire will be able to effectively
raise an additional $240 million in capital. It also expects to expand its
future borrowing capacity.
-By Roger Cheng, Dow Jones Newswires; 212-416-2153; roger.cheng@dowjones.com
(END) Dow Jones Newswires
11-10-090940ET
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