Feb. 4 (Bloomberg) -- Deutsche Telekom AG’s T-Mobile USA unit may be close to a deal to buy wireless spectrum from Clearwire Corp., two people familiar with the talks said.
T-Mobile USA is the only potential bidder and the sale of the spectrum could happen by the end of the first quarter, one of the people said, speaking on condition of anonymity because the talks are private. T-Mobile USA isn’t in a rush to buy spectrum and can demand a financially advantageous deal, which may happen in the near term, another person said.
T-Mobile, the fourth-largest mobile-phone operator in the U.S. after Verizon Wireless, AT&T Inc. and Sprint Nextel Corp., accounts for about a quarter of the German company’s sales and has seen profit slide as it trailed rivals in building out a third-generation mobile network and missed out on being able to sell Apple Inc.’s iPhone. The company may fund the spectrum purchase with proceeds from the sale of its U.S. telecommunications towers, valued at $2 billion by analysts.
Clearwire has warned investors it’s short on cash, saying it would run out by mid-year ahead of a bond sale. In December, the company said it raised $1.325 billion in bonds and exchangeable notes. Its biggest investor, Sprint, which owns more than half of its shares, declined to participate in the bond offering.
“We continue to seek additional funding,” from sources including a spectrum sale, said Clearwire spokesman Mike DiGioia. He declined to comment on any discussions with T-Mobile. Deutsche Telekom spokesman Michael Lange declined to comment.
Clearwire rose 56 cents, or 11 percent, to $5.84 in Nasdaq Stock Market trading at 4 p.m. in New York. Deutsche Telekom advanced 1.1 percent to close at 10.07 euros in Frankfurt.
The cost to protect Sprint’s debt from default fell by the most in two months. Credit-default swaps on the company’s debt slid 16.7 basis points to 357.9 basis points, according to data provider CMA. The contracts are down from 543.6 last February.
Credit swaps, which typically fall as investor confidence improves and rise as it deteriorates, pay the buyer face value if a borrower fails to meet its obligations, less the value of the defaulted debt. A basis point equals $1,000 annually on a contract protecting $10 million of debt.
Clearwire has been building out a high-speed, fourth-generation network and reselling the service to partners, including Sprint. Competitors with more cash are catching up, heightening competition with Kirkland, Washington-based Clearwire. Verizon Wireless, the largest U.S. wireless carrier, began selling 4G service to customers in some markets last year.
Clearwire’s spectrum auction, which was to accept bids through the end of January, was extended with Deutsche Telekom remaining the sole potential bidder, one of the people said.
The German company’s chief executive officer, Rene Obermann, and the head of the U.S. unit, Philipp Humm, said one of the challenges the company faces is obtaining spectrum to build the next-generation network using long-term evolution technology, or LTE.
“Deutsche Telekom is exploring various options to acquire additional spectrum and reduce the gap regarding economies of scale compared with its larger competitors, including partnering with other companies,” the Bonn-based company said in a Jan. 20 statement.
Humm said at the time that the existing network is adequate to meet demand, and that there are no imminent announcements on spectrum purchase. Building out an LTE network may cost between $1 billion and $2 billion, the company said. Chief Technology Officer Neville Ray said that T-Mobile will need a spectrum partner by 2014 or 2015.
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