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Sprint rescues Clearwire with up to $1.6B in funding, revenues

A new agreement will keep the wireless-service provider out of default and allow it to continue building out its network.

Clearwire made good on a $237 million interest payment due today and announced it has finalized a funding and resale agreement with Sprint Nextel worth up to $1.6 billion to keep the company afloat.

For months, Clearwire's future has been anything but clear as the company scrambled to line up cash to fund daily operations and finish a nationwide 4G wireless network. Last month, the company said it might miss its scheduled debt payment due to its tight financial situation. It had been unclear whether Sprint, Clearwire's largest investor and also its biggest wholesale customer, would bail out the company.

Sprint, in fact, had publicly played the miser, expressing clear reluctance to invest further in Clearwire. But the carrier recently raised money in a debt offering and stated at the time that it might use some of the proceeds to help Clearwire.

The new Sprint-Clearwire deal includes $926 million in payments Sprint will make for unlimited 4G WiMax services as well as possible prepayment for LTE services and, potentially, additional equity investment in Clearwire.

Clearwire currently offers 4G wireless service over its WiMax network. The company plans to add LTE technology. Sprint uses Clearwire's WiMax network to deliver 4G wireless services today. And the company has also recently discussed a strategy to offer LTE in the future. Clearwire's commitment to adding LTE to its network was an important piece of the strategy.

Sprint will use Clearwire's WiMax network at least through 2015. Sprint plans to continue selling the WiMax service with two year contracts through at least 2012.

Sprint also plans to make $350 million in a series of prepayments over the next two years for LTE capacity if Clearwire achieves certain milestones for building its LTE network by June 2013. The agreements also establish long-term usage-based pricing for LTE services for 2012 and beyond. The companies have also agreed to collaborate on a network plan for LTE.

Clearwire will seek additional funding before it begins building the next generation LTE network, the company said. Sprint expects to launch service using Clearwire's LTE network in 2013.

Sprint has also committed to providing additional equity funding to Clearwire in the event of an equity offering. If Clearwire raises new equity between $400 and $700 million, Sprint will participate in the offering, putting in up to $347 million, the company said.

Clearwire also made its $237 million interest payment as part of the agreement.

Sprint's CEO Dan Hesse said that the new arrangement is good for both companies and will extend Sprint's relationship with Clearwire.

"It provides Sprint improved pricing, allows us to continue to provide WiMAX 4G services to our customers today and to new customers in the future and provides additional LTE capacity to help complement our Network Vision strategy and meet our customers' growing data demands," he said in a statement.

Clearwire has said in the past that it needs about $1 billion in funding to operate its current network and continue building its 4G network. Specifically, it needs about $150 million to $300 million to continue its operations, and another $600 million for the LTE upgrade. The company ended the third quarter of 2011 with $711 million in cash.