3 Min Read
NEW YORK, Oct 25 (Reuters) - Wireless service provider Clearwire Corp slashed its capital spending target for 2012 by more than half because it is slowing down its network upgrade for high-speed wireless services to conserve money.
The company, whose biggest shareholder is Sprint Nextel , said Softbank Corp's plan to pay $20 billion for a 70 percent stake in Sprint is good news for Clearwire, which also counts Sprint as its biggest customer.
Many analysts expect that Sprint will use the Softbank investment to buy the remainder of Clearwire or provide it with additional funding.
Clearwire needs more cash to expand its network and to keep operating. It said on Thursday that it now has enough money to fund its operations until the end of the third quarter of 2013. On July 26 it had said it has funding to last at least a year.
Sprint has not given details on its plans for the Softbank money. Clearwire also declined to comment on this prospect on Thursday.
Roe Equity Research analyst Kevin Roe said he was happy to see Clearwire is "going to spend less," but noted that investors are more focused on its improved prospects for funding.
"The Clearwire story all revolves around Softbank now," Roe said, adding that Clearwire's slower upgrade plan is likely due to Sprint's announcement earlier in the day that it is a quarter behind in its own network improvement plans.
Clearwire cut its target for 2012 capital spending to a range for $125 million to $175 million from its previous budget of $350 million to $400 million.
The decline in spending is primarily due to Clearwire's decision to defer a portion of its upgrade to "better align" spending with the expected receipt of revenue from the upgrade, the company said.
It said that it will have 2,000 cell sites upgraded for high-speed wireless services based on Long Term Evolution (LTE) by the end of June 2013. In June it expects to start receiving Sprint prepayment installments from Sprint, which will rent space on Clearwire's LTE network to bolster its own service.
The company said that it will use equipment from Samsung Electronics Co, Cisco Systems and Ciena Corp for its network upgrade.
It plans to have Samsung, also a supplier for Sprint, replace existing Clearwire equipment from Motorola, which sold its network equipment business to Nokia Siemens .
Clearwire also narrowed its forecast for an adjusted loss before interest, tax, depreciation and amortization for all of 2012 in a range of $150 million to $200 million, compared with its previous target for a loss of $175 million to $225 million.
Clearwire's third-quarter loss widened to $213.8 million, or 22 cents per diluted share, compared with a loss of $84.8 million, or 54 cents per diluted share, in the year ago quarter. Revenue fell to $313.9 million from $332.2 million.
Its shares were down a penny in late trade after closing down 3.7 percent at $1.80 in the regular Nasdaq session on Thursday.