By Thomas Gryta
Sprint Nextel Corp. (S) is no longer the majority owner of
Clearwire Corp. (CLWR) after the latter's latest issuance of stock
to raise money.
The move marks the latest chapter in the complex relationship
between Overland Park, Kan.-based Sprint and the smaller
wireless-network company that has been its partner in developing
its 4G network. Sprint remains Clearwire's largest shareholder and
their working relationship hasn't changed, according to both
companies.
A Sprint spokesman couldn't give an exact estimate of the
current stake because the Clearwire equity offering is ongoing.
The Sprint spokesman said the company has a right to buy shares
in Clearwire equity offerings but declined to do so in the latest
round. Sprint will evaluate future opportunities to buy shares on a
case-by-case basis.
A year ago, Sprint reduced its voting stake to distance itself
from the financially fragile Clearwire. The move meant that
Clearwire couldn't be considered a unit and potentially affect
Sprint's debt if there was a default or other major event. Sprint
surrendered Class B shares, which aren't publicly traded, cutting
its voting interest to 49.9% from 54%.
But now that Clearwire has been selling shares to raise funds,
Sprint is no longer the majority holder so it has reclaimed its
voting rights in to order to match its economic stake. According to
a filing, it paid about $8,000 to reclaim the Class B shares.
Both companies stressed that the shift doesn't alter other
components of their relationship.
Despite owning less than 50% of Clearwire, Sprint's
equity-ownership agreement is unchanged and it will continue to
control seven of the 13 seats on Clearwire's board.
Late last year, Clearwire signed a new network partnership with
Sprint to help fund its operations beyond 2012, along with selling
additional $300 million in equity. In May, the company said it
would raise up to $300 million in another stock sale over the
coming months to help fund operations.
Sprint is building the 4G network on a standard known as LTE,
which is in use by Verizon Wireless and AT&T Inc. (T), over the
next several years. Sprint also uses Clearwire's 4G network that
runs on WiMax technology and Clearwire is also building its own LTE
network.
Numerous investors have walked away from Clearwire. In March,
Google Inc. (GOOG) sold its entire 29.4 million share stake in
Clearwire for a $433.5 million loss, ending a nearly four-year $500
million investment. Intel Corp. (INTC) wrote down the entire value
of its 7.3% voting stake in Clearwire earlier this year.
--Greg Bensinger and Shara Tibken contributed to this
article.
Write to Thomas Gryta at thomas.gryta@dowjones.com