China Mobile Communications Corp (Beijing, China) and Clearwire Corp (Kirkland, Wash., U.S.A.) have teamed up to develop high-speed mobile devices and infrastructure, potentially giving the cash-strapped U.S. 4G operator a technological boost.
Shares of Clearwire closed up 7% at $2.73 after the news as investors bet that Clearwire's collaboration with China Mobile, the world's largest wireless operator, decreased the risks around Clearwire's future technology choice.
Under their agreement China Mobile will work on chipsets and devices for TD-LTE, a 4G wireless technology, that both companies are planning on using.
Clearwire announced in August it was looking for almost $1 billion in funding to help upgrade its network with Long Term Evolution (LTE). TD-LTE is a variant on that standard.
It's upgrading to this technology partly because its current network is based on WiMax, a technology that has not been embraced by the world's largest service providers. This has made the development of WiMax devices more expensive than cellphones running on more popular technologies.
Chief Financial Officer Hope Cochran said that while the company was looking at a lot of options for how to raise new funding, vendor financing was likely to be the easiest option.
This could involve a credit agreement with a network equipment maker involved in the company's network upgrade. Cochran said during a webcast of an investor conference, that vendor financing would be just a "piece of the puzzle."
The company is also looking at options such as debt, which Cochran conceded is "expensive" right now, and an equity investment with a strategic partner.
Sprint Nextel Corp (Overland Park, Kan., U.S.A.), the majority owner of Clearwire, has held talks with cable partners about supporting their loss-making Clearwire wireless venture in the face of increasing competition from larger rivals, sources have said.
(Reporting by Edwin Chan and Sinead Carew, Editing by Dave Zimmerman, Bernard Orr)