Clearwire reeling as Sprint forges its own LTE plans

Wireless network provider Clearwire’s (s clwr) stock fell 32 percent to $1.39 Friday following an announcement by Sprint (s s) Friday that it was launching an LTE network without the help of Clearwire, throwing into doubt its role in Sprint’s 4G future. Sprint addressed investors and analysts at a strategy update meeting Friday, and outlined its plans to aggressively launch an LTE network that will build on its existing 1900 MHz and 800 MHz spectrum.

Sprint, whose shares fell 18 percent Friday down to $2.44, currently offers customers access to a WiMAX-based 4G network through Clearwire, in which it owns about 50 percent stake. But Sprint is readying a multi-billion dollar plan to launch an LTE network that will cover 250 million people by the end of 2013, and the plan doesn’t appear to have a role for Cleawire. Sprint’s Dan Hesse said the carrier will continue to sell WiMAX devices through the end of next year, but then said Sprint will be able to run its own 4G LTE network on its existing spectrum and will turn to LightSquared in 2015, provided LightSquared gets approval from the FCC to run its 4G network.

For now, Hesse pointed to Sprint’s existing deal with Clearwire that runs through 2012 and said Sprint is looking to extend that. Sprint may just want to continue supporting existing Clearwire WiMAX users which Hesse said will own devices that need network access beyond 2012. But Sprint would not comment on any intentions to incorporate Clearwire into its LTE plans. When pressed, Hesse, declined to say if Sprint would invest more in Clearwire to prevent it from going bankrupt, saying only that Sprint would participate in any bankruptcy proceedings and would ensure that existing Sprint WiMAX customers were unaffected.

Sprint’s reticence on the matter of Clearwire has apparently panicked investors who are already nervous about Clearwire’s prospects. The stock has already been battered after Sprint inked a deal with LightSquared to use its 4G spectrum — which pales in comparison to the quality and amount of Clearwire’s airwaves. Clearwire has struggled to expand its network and raise capital, prompting concerns that it might go bankrupt.

The fact that Sprint is not better articulating a position for Clearwire would seem puzzling. But Sprint’s Steve Elfman, president of network operations and wholesale, may have shed some light on the matter when he said at the investor meeting that Sprint has no control over Clearwire, “and we’ve suffered accordingly.” That makes it sound like Sprint has not been happy with the choices Clearwire has made and is content to forge ahead with its own plans.

A more sinister reading might be that Sprint knows that by withholding its public support, it can drive Clearwire into bankruptcy, where it might be able to buy out the company for less than it would have to pay now.

Clearwire, however, put on a strong face Friday, saying in a statement that it is pursuing a TDD- LTE network and that Sprint is still dependent on Clearwire to fulfill its long-term 4G plans.

“As the largest wholesaler of 4G capacity, with unmatched spectrum, Clearwire is uniquely positioned to offer capacity to Sprint, and other carriers, particularly in urban areas where demand is high and their 4G spectrum will be inadequate. Sprint remains dependent on Clearwire for 4G and nothing about today’s announcement changes that,” Clearwire said.

But Clearwire said it needs $600 million to switch over, on top of its $4 billion in debt and its existing upgrade demands for its WiMAX network. Elfman said the $600 million only covers the cost to convert 120 million subscribers from WiMAX to LTE but doesn’t pay for a national build out or ongoing costs of ownership.

Without a public vote of confidence from Sprint, it’s going to be even tougher for Clearwire to make a go of it. It seems like both companies are walking a tight rope here and Sprint seems more confident that it can get through it on its own. We’ll have to see if Sprint is making the right bet.