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Sprint opens the door to funding Clearwire

The wireless provider plans to offer up a private placement of notes to raise cash; it cites the funding of Clearwire as one possible use of the funding.

Sprint CEO Dan Hesse speaks to his leadership team at an investor meeting last month. Roger Cheng/CNET

Sprint Nextel inched closer to potentially providing funding to cash-strapped Clearwire in its latest debt offering.

The company said today that it plans to offer a private placement of debt due in 2018 and 2021. The uses include general expenses, network upgrades, and the repayment of existing debt. The most interesting, of course, is the potential funding of 4G WiMax provider Clearwire, which Sprint has so far been mum on.

"Securing the capital to fund those items while maintaining a solid cash balance in the case that Clearwire needs funding is important for Sprint's future," said Walter Piecyk, an analyst at BTIG Research.

Sprint is Clearwire's largest customer and majority shareholder, so many company observers felt it was logical for the company to step up and provide funding. Sprint's 4G service is powered by Clearwire's network, although it recently unveiled plans to launch its own 4G network. But Sprint has been reluctant to discuss its position on providing funding. Clearwire reported its third-quarter results this week and similarly had little to offer in the way of an update on the funding situation.

Clearwire is in a bind. The company needs $150 million to $300 million for its network operations, and another $600 million to upgrade its network to 4G LTE, the standard widely used by the other carriers. With many of Clearwire's other major shareholders--including Google, Intel, and a few cable providers--reluctant to re-up, it's unclear where the financing will come from. The company can still sell excess spectrum, or pursue a debt or stock offering. CEO Eric Prusch told CNET that he expects to obtain financing by the end of the year.

There's some hope on the Sprint front. Last week, Sprint said it struck a nonbinding technical agreement that would allow the two to work together on Clearwire's planned LTE network. Bloomberg reported that the two were close to an extension on their networking deal that would provide a stable flow of revenue for Clearwire.

Sprint, meanwhile, is facing its own looming cash crunch. The company has to pay off $2 billion in debt that matures in the first quarter. It is also expected to use plenty of cash to fund its network upgrade and the hefty subsidies to Apple for its right to sell the iPhone.