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UPDATE: Clearwire To Get $1.56 Billion Cash Infusion From Backers 15 minutes ago - Dow Jones News
Related Companies Symbol Last %Chg CLWR 7.20 5.88% CMCSA 14.98 -1.16% CMCSK 14.48 -0.75% INTC 19.57 0.57% S 3.28 -4.37%
As of 10:40 AM ET 11/10/09 (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.
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