Sprint to pay Clearwire $1B in new pricing contract
Sprint and Clearwire have ended their long-standing dispute over wholesale pricing with a multi-million-dollar settlement.
Sprint will pay at least $1 billion in 2011 and 2012 for access to Clearwire's WiMAX network, which Sprint resells under its own brand.
"Sprint has been our biggest and most important customer and partner since we launched 4G services in the U.S. more than two years ago," interim Clearwire CEO John Stanton said. "Today's agreement further aligns Sprint and Clearwire's interests and lays the foundation for a continued, constructive relationship."
Under the terms of the settlement, Sprint will pay $300 million this year and $550 million next year for its subscribers' use of Clearwire's WiMAX network, as well as $175 million in pre-payments for data used beyond 2012.
Sprint will also pay Clearwire $28 billion for its customers' prior use of Clearwire's mobile broadband services, putting an end to the companies' dispute over pricing for subscribers who use dual-mode 3G/4G devices that run on both Clearwire's WiMAX network and Sprint's CDMA network.
The dispute between Clearwire and Sprint over wholesale pricing for smartphone users has stalled Clearwire's plans to auction off some of its surplus spectrum to help fund the build-out of its WiMAX network.
Clearwire said earlier this year it was putting off a decision on the spectrum sale until it resolved the pricing dispute with Sprint. The potential spectrum sale was not mentioned in the wholesale pricing settlement.
The settlement with Sprint brings Clearwire a much-needed influx of money. The company has been forced to stall plans for a Clear-branded smartphone and has slowed its network build in an effort to conserve cash.
The amount paid by Sprint for Clearwire's mobile broadband services will be determined on a per-gigabyte basis, according to documents filed with the SEC. The companies did not disclose specific pricing, but the settlement contains a favored reseller provision that ensures Sprint will receive the lowest wholesale prices for Clearwire's WiMAX network.
Sprint will also be allowed to deploy what it calls "custom network solutions" at its own cost to improve in-building coverage for its WiMAX customers. The deployments will serve as an extension to Clearwire's network and must be compatible with its network.
In addition to making improvements to in-building coverage, Sprint is being allowed to install up to 1,000 wireless local area networks (WLANs) that are not an extension of Clearwire's WiMAX network, but which transmit on a portion of Clearwire's spectrum.
The equipment deployments will help Sprint close coverage gaps in the WiMAX service it offers to its subscribers, as Clearwire's efforts to build out its network have been slowed down by the funding shortfall.
It's not clear how rumors from The Wall Street Journal that Sprint was considering a wholesale LTE deal with LightSquared fit into the company's current arrangement with Clearwire. Sprint has said it is considering both LTE and WiMAX for future mobile broadband services.