Clearwire rallies on subs growth, MetroPCS deal talk

Clearwire rallies on subs growth, MetroPCS deal talk

Stock Market Predictions

NEW YORK (Global Markets) - Clearwire Corp reported (CLWR.O) better-than-expected subscriber numbers on Thursday, while MetroPCS Communications (PCS.N) said it is interested in spectrum deal with the wireless telecommunications company.

The numbers and Clearwire's preliminary third-quarter results, seemed to ease concerns about the company, which has been the subject of bankruptcy speculation.

Shares in Clearwire, which is majority-owned by Sprint Nextel (S.N), rose 26 percent. They had lost about a third of their value last Friday after Sprint, Clearwire's biggest customer, said it could benefit from a Clearwire bankruptcy.

This comment and Sprint's announcement that it will not sell phones that run on Clearwire's WiMax network after 2012 led to fears that Sprint no longer wants to support Clearwire.

Besides the subscriber numbers, Clearwire also reported a strong-than-expected cash position.

Also on Thursday, MetroPCS' finance chief told an investor conference that his company was "uniquely positioned" to make a spectrum deal with Clearwire.

A MetroPCS spokesman said Clearwire is just one option, but investors saw the comment as positive.

"A wholesale agreement with MetroPCS would be a significant positive for Clearwire," CreditSuisse analyst Jonathan Chaplin said in a research note.

Clearwire has said it is in talks with U.S. operators about renting space on its network, particularly where there is a high demand for services like mobile Web surfing. It has also said that it would entertain offers to buy its spectrum.

Clearwire depends almost entirely on subscriber growth from Sprint, which uses Clearwire's network for its high-speed wireless offerings. Chaplin said Clearwire needs more wholesale partners because Sprint is planning to upgrade its network to lessen its dependence on Clearwire.

Nelson said the wholesale numbers gave him confidence that Sprint will need to work with Clearwire in the future, said Mizuho analyst Michael Nelson.

STRONG GROWTH, SPECTRUM INTEREST

Clearwire expects to report 1.9 million new net wholesale customers for the third quarter, compared with the average estimate for 1.4 million from four analysts.

Clearwire, which needs about $1 billion in fresh funding to support its operations and upgrade its network, said cash and equivalents fell to $700 million on September 30 from $848 million at the end of June. That beat analyst estimates for less than $600 million.

The stronger than expected numbers should buy Clearwire some time to improve its viability, analysts said.

"The longer they can extend the runway, the more likely they can have success in raising additional capital," said Nelson.

Clearwire's forecast implied a loss of less than $54 million, according to Nelson, who had estimated a loss of $104 million before interest, tax, depreciation and amortization.

Clearwire has said it wants to raise up to $300 million to support its operations, and $600 million to upgrade its network to catch up with competitors.

Clearwire, which is finalizing its third-quarter report, estimated its subscriber count at 9.5 million at the end of the quarter. In August, it raised its 2011 year-end target to 10 million subscribers from 9.5 million.

The company expects to report third-quarter revenue of $332 million, up 126 percent from a year earlier.

Clearwire shares closed up 35 cents, or 27 percent, to $1.65 on Nasdaq. Sprint shares closed up 8 percent at $2.78 on New York Stock Exchange. MetroPCS shares closed up almost 5 percent at $8.94.

(Reporting by Sinead Carew. Editing by Lisa Von Ahn, John Wallace and Robert MacMillan)

Read More

Sprint says may use debt to fund Clearwire

Sprint says may use debt to fund Clearwire

Stock Market Predictions

(Global Markets) - Sprint Nextel Corp said it could use the proceeds from a private debt offer to fund Clearwire Corp, sending shares in the cash-strapped high-speed wireless firm up 8 percent on Friday.

But one research firm warned that hopes for Sprint's participation in a long-awaited financing deal for Clearwire may have been too high.

Sprint sold $4 billion in bonds on Friday, according to underwriters. The company had included Clearwire funding among possible uses for the debt proceeds when it announced the offering on Friday morning.

But Sprint executives later told debt investors that Clearwire's inclusion on that list did not indicate any increased willingness to fund the debt-strapped wireless network operator, according to one investor.

"Specifically, they said they were not going to invest any more that would put them above a 50 percent voting share in Clearwire," said Scott Dinsdale, a vice president for KDP Investment Advisors, a research and asset management firm.

Dinsdale said he participated in an investor call held by lead manager JPMorgan to discuss the debt offering.

Sprint has a majority stake in Clearwire but holds less than 50 percent of voting rights in the company, as a way to insulate itself in the case of a Clearwire default.

Sprint, whose credit rating was downgraded on Friday, declined to comment beyond a brief statement in which it said other potential uses for the proceeds could be repaying existing debt and upgrading its network.

SPRINT RAISES $4 BLN

Shares in Clearwire closed up 8 percent on Friday, after rising as high as 28 percent. Sprint had previously refused to say if it would help Clearwire's current efforts to raise almost $1 billion in financing.

But KDP's Dinsdale said Sprint told the conference call it only included Clearwire on the list for legal reasons.

Mizuho analyst Michael Nelson said it would have been striking if Sprint had not included Clearwire.

"It provides a glimmer of hope," said Nelson.

Investor nerves have frayed after Sprint executives triggered a 32 percent drop in Clearwire's shares on October 7, when they suggested at an investor conference that a Clearwire bankruptcy could be "constructive."

Sprint, Clearwire's biggest customer, also said at the event that it would only sell phones for Clearwire's current service through the end of 2012.

Sprint has since softened its tone. It said on October 26 that it was negotiating an expansion of its network deal with Clearwire, but refused then to discuss funding prospects.

Clearwire is seeking up to $300 million to fund operations and about $600 million for a network upgrade that it urgently needs to help it compete with rivals and win wholesale customers other than Sprint.

It said earlier this week that the companies were in talks but that they had "gaps" due to differing strategic goals.

Even after Friday's move, Clearwire's low share price indicated investor concern that it could still end up filing for bankruptcy, Mizuho's Nelson said. Standard & Poor's CCC+ rating of Clearwire also indicates a bankruptcy risk.

SPRINT DOWNGRADE

A Clearwire spokesman declined to comment. Clearwire said earlier this week that it has enough money to fund its operations for the next 12 months.

Sprint itself needs to raise financing to upgrade its network and pay for the high cost of its agreement with Apple Inc to sell iPhone.

S&P downgraded Sprint's corporate credit rating one notch to B+ from BB- on Friday but said it is no longer under review for another downgrade. Ratings downgrades tend to increase the cost of raising capital.

Sprint said on October 26 that it could need up to $7 billion in new financing.

On Friday it priced $4 billion in two tranches, including $3 billion in junior guaranteed notes due in 2018 with a 9 percent yield. The second tranche was $1 billion of non-guaranteed notes due in 2021 with an 11.5 percent yield, according to underwriters of the debt.

One source familiar with the matter had said earlier in the day that Sprint was looking to issue $2 billion to $2.5 billion in junior guaranteed 2018 notes at a yield of 9 percent and $500 million of 2021 unguaranteed debt for about 11.5 percent.

Clearwire closed up 14 cents, or 8 percent, at $1.89 after touching $2.25 earlier in the session on Nasdaq. Sprint closed up 6 cents or 2 percent at $2.87 on New York Stock Exchange.

(Additional reporting by Stephen Carter in New York; editing by Gerald E. McCormick, Derek Caney, Bernard Orr and Richard Chang)

Read More