Cricket Communications has signed a five-year agreement with Clearwire for wholesale access to its not-yet-built TD-LTE network.
The deal will buoy Cricket’s own LTE service and provide Clearwire with a second customer for its new network, still in the planning stages.
“We believe this agreement with Clearwire provides us with an attractive option to supplement our own LTE build-out strategy and gives us the flexibility to access additional 4G capacity where needed,” said Doug Hutcheson, president and CEO of Cricket parent company Leap Wireless International.
Cricket will use Clearwire’s service to add capacity to its own LTE service, which has so far only gone live in Tucson, Ariz. The network will be expanded to two-thirds of Cricket’s current network footprint over the next two to three years and is expected to cover 25 million people this year.
The prepaid provider had planned to use LightSquared’s wholesale network to supplement its mobile broadband coverage, but that strategy was thwarted by the FCC’s decision to block LightSquared from moving forward over problems with GPS interference.
LightSquared’s failure left Clearwire in a strong position as the country’s lone wholesale provider for mobile broadband services.
Financial terms of the deal were not disclosed. Macquarie Securities analysts Zach Horat and Kevin Smithen said in a research note today that it “could result in a few hundred million dollars per year” in incremental earnings for Clearwire.
“The key question is whether or not Leap will prepay any of this usage in order to aid Clearwire in funding its LTE network build-out over the next two years,” the analysts said.
They speculated that if Clearwire was able to sign MetroPCS as its third wholesale LTE customer, it could become self-funding sometime next year.
Clearwire has needed a steady influx of cash to stay afloat and has repeatedly raised money through debt offerings and funding from Sprint, its largest shareholder and customer.
Clearwire’s top executive called the contract with Cricket a “key step forward” for the business. Sprint was Clearwire’s sole customer for the wholesale TD-LTE service before Cricket signed on.
“This long-term partnership with Cricket is a key step forward in the development of Clearwire’s wholesale LTE business model,” said Erik Prusch, president and CEO of Clearwire.
Clearwire is still on the hunt for other customers, Prusch said. “We plan to continue to actively seek new opportunities to serve the needs of other 4G providers,” he said.
The bulk of Clearwire’s revenue comes from Sprint, whose customers use Clearwire’s current WiMAX network for 4G service. Sprint is building its own LTE network and is phasing out its use of Clearwire’s WiMAX network but will eventually use Clearwire’s planned TD-LTE network to bolster its own capacity.
The addition of new wholesale customers could put Clearwire’s finances on a more solid foundation and give it a degree of independence from Sprint.
Clearwire has said it will have its first 5,000 base stations online by mid-2013 and will overlay its existing WiMAX network with the new technology instead of going with a standalone architecture.
The network will be what Clearwire calls “LTE-Advanced-ready,” capable of supporting carrier aggregation technology that will improve its efficiency and capacity.
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