Earlier this month, Clearwire was cutting back in order to save revenue. The company behind the 4G network that powers Sprint is definitely having some money problems. Now, they are planning to sell more than $1.1 billion in debt in order to keep their heads above water. When the announcement came out, Clearwire stock fell 6.6 percent. Some investors are concerned about the cost of the debt while others are just disappointed that Clearwire couldn’t raise more.
On the other hand, Sprint shares rose 5 percent. This is presumably because investors see this as a sign that Sprint won’t have to bail out Clearwire by raising it’s investment. They already own 54% of the company. Clearwire is struggling to expand their 4G network while also trying to figure out how it will pay for these costs. Some estimates say they need $3 billion to build a network that competes with competitors like Verizon.
“A billion is nice. It gives them breathing room in the near term,” said BTIG analyst Walter Piecyk. “It obviously increases their negotiating position because they’re not as desperate for cash.”
via Reuters