Saturday, November 19, 2011

Is Clearwire facing bankruptcy

Clearwire logoClearwire may be in a heap of trouble. The wireless carrier is planning to strategically delay paying a $237 million debt payment that is due December 1st says a Wall Street Journal report. The payment would put a significant dent in the company’s cash reserves and hurt future expansion plans. The WiMAX company currently has about $698 million in cash and short-term investments that it needs to invest wisely if its 4G network is going to compete with Verizon and AT&T.
Clearwire has a 30-day grace period to make the payment which gives it some breathing room. Chief Executive Erik Prusch is reportedly going to use that time to secure more funding and sign new service deals. Delaying the payment is a last ditch effort to keep the company afloat and what happens in the next month may decide the company’s future..
To  make matters worse, Clearwire’s future with Sprint is uncertain. Sprint owns 54% of Clearwire and is using WiMAX as its 4G solution. Recently, Sprint said it was considering a switch to LTE, the major competitor to Clearwire’s WiMAX network. Sprint also agreed to carry the iPhone, a handset that is not and probably never will be compatible with WiMAX.
Though Clearwire did not mention it, the Wall Street Journal Report did bring up the “B” word – bankruptcy. If Clearwire fails to come up with this payment, the company may be forced to file for bankruptcy so it can restructure its debts. A person familiar with Sprint said the carrier would not buy out Clearwire just to keep it out of bankruptcy. Without the backing of Sprint, Clearwire’s future looks dim.

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