Sprint cedes its majority stake in WiMAX carrier Clearwire
Posted on June 11, 2012 at 13:51 PM EDT
Sprint gave up its voting majority on the Clearwire board last year, but now it has given up its majority ownership in the 4G provider as well. By letting its stake fall below 50 percent, Sprint protects itself if Clearwire were to default on its debt.
Sprint gave up its voting majority on the Clearwire board last year, but now it has given up its majority ownership in the 4G provider as well, according to Reuters. Sprint’s stake in the company once so crucial to its mobile broadband strategy has now fallen below 50 percent, which will help the carrier keep its distance from the Clearwire if it went bust.
When Clearwire returned to the market for more funding in December, all existing shares were diluted. Sprint was giving the option to match any additional investment in order to maintain its same ownership position, and it appears to have done so up to a point. Clearwire raised $402.5 million form new investors, and Sprint kicked in $331.4 million, giving Clearwire the cash it needs to start its LTE network build.
By not matching the public offering completely, Sprint let its ownership fall well below 50 percent, which in turn allowed Sprint to reclaim the voting shares it surrendered to Clearwire last year. “Now that our economic interest has fallen below 50 percent, we are reclaiming our full voting rights so that our voting rights and economic rights are once again aligned,” Sprint spokesman Scott Sloat told Reuters.
By not having direct control over the company Sprint protects itself from Clearwire’s creditors if the company were to default on its debt, which is why Sprint surrendered its voting rights in the first place. While Sprint relies on Clearwire to power its current WiMAX service and supply additional LTE capacity in the future, Sprint is launching its own commercial LTE service this summer, while gradually phasing out its dependence on WiMAX.
Photo courtesy of Shutterstock user Susan Law Cain
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