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Clearwire Said to Seek Up to $5 Billion in Spectrum Auction

Clearwire Corp., the high-speed wireless carrier, is seeking to raise $2.5 billion to $5 billion in a wireless-spectrum auction that has attracted telephone and cable companies, said people with direct knowledge of the sale.

AT&T Inc., Verizon Wireless, Deutsche Telekom AG, Time Warner Cable Inc. and Clearwire’s majority owner, Sprint Nextel Corp., are among potential buyers of the spectrum, said the people, who declined to be identified because the process isn’t public. The bidding is in its second round and being managed by Deutsche Bank AG, they said. Clearwire shares surged as much as 11 percent.

The company said last month it is looking for additional funds to fuel expansion, and has had discussions with potential investors, including Deutsche Telekom’s U.S. wireless unit, T- Mobile USA Inc. Clearwire will need about $2 billion by the fourth quarter to fund its network construction early next year, said John Hodulik, an analyst at UBS AG in New York.

“There are big ramifications from this from a funding standpoint,” said Hodulik, who has a “neutral” rating on Clearwire. “If they get $5 billion, they could fund the business without raising any extra capital.”

Clearwire rose 46 cents, or 6.8 percent, to $7.21 in Nasdaq Stock Market trading at 4 p.m. New York time, the biggest gain since March. The shares have gained 6.7 percent this year. Sprint, which owns more than half of the company, added 4 cents to $4.63 on the New York Stock Exchange.

WiMax Technology

Clearwire, based in Kirkland, Washington, sells high-speed wireless service under its own brand and through partners in 55 markets. Its WiMax technology is one kind of so-called fourth- generation mobile service.

The company is selling up to 40 megahertz of spectrum per market, a slice of its wireless capacity, one person said. A value of 20 cents to 40 cents per megahertz of spectrum per U.S. resident would reach the $2.5 billion to $5 billion price tag, Jennifer Fritzsche, an analyst at Wells Fargo Securities LLC in Chicago, said in a research note today.

The lower end of that range would be in line with sales of similar spectrum in Europe, she said. The company has an average of 120 megahertz of spectrum in each market, she said.

Susan Johnston, a Clearwire spokeswoman; Mark Siegel, an AT&T spokesman; Alex Dudley, a Time Warner Cable spokesman; Reid Walker, a T-Mobile USA spokesman; John Gallagher, a Deutsche Bank spokesman, and Marquett Smith, a Verizon Wireless spokesman, declined to comment. Bill White, a spokesman for Sprint, didn’t provide comment.

Reducing Sprint Reliance

Clearwire’s 12 percent notes due in December 2015 rose 1.5 cents to a mid-price of 111 cents on the dollar, according to New York-based brokerage firm R.W. Pressprich & Co. Clearwire has about $2.5 billion of bonds outstanding, according to data compiled by Bloomberg.

The sale may increase Clearwire’s independence from Sprint, reducing a funding gap that some analysts put at about $2 billion going into next year. Sprint could use the cash it would have invested in its unprofitable partner to pay down its own debt, Fritzsche said in the note.

Clearwire got $1.56 billion from Sprint and other investors in 2009 to expand its high-speed network to 120 million people by the end of this year. The company’s other shareholders include Google Inc., Time Warner Cable and Comcast Corp.

Clearwire may be giving up some of its competitive advantage in the sale, Hodulik said. The company will be parting with spectrum holdings, which can determine call quality, coverage and data speeds for customers. Clearwire may also hurt its bargaining position with Sprint, should the larger company want to increase its Clearwire stake.

“Sprint is the logical buyer of these assets, and if you sell them a big chunk of spectrum, your leverage decreases when you get to the negotiating table,” Hodulik said.

To contact the reporters on this story: Serena Saitto in New York at ssaitto@bloomberg.net; Amy Thomson in New York at athomson6@bloomberg.net

To contact the editor responsible for this story: Jennifer Sondag at jsondag@bloomberg.net; Peter Elstrom at pelstrom@bloomberg.net

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