Sprint: Coming To Moment Of Truth; CLWR Jumps 17%

Walter Piecyk of BTIG Research today writes that Sprint-Nextel (S) is arriving at a “critical point” in its negotiations with its broadband wireless partner Clearwire (CLWR).

Basically, Clearwire is supposed to make a debt payment tomorrow, and it’s not clear whether Sprint will sign a new wholesale agreement with Clearwire that will ease the latter’s efforts to meet its obligations. (Clearwire has a 30-day grace period on the payment, he notes.) If Sprint doesn’t support Clearwire, and if Clearwire ends up in restructuring down the road, Sprint will have shot itself in the foot by imperiling its “4G” wireless service through Clearwire, which currently has 8 million customers, Piecyk argues.

Piecyk writes that it’s hard to know what Sprint will do because the company’s actions have defied logic: They had a lead in 4G with Clearwire’s help but they squandered it, and they’ve now embroiled themselves in building out a new Sprint 4G service at a cost of multiple billions, and paying for Apple’s (AAPL) iPhone at a cost of multiple billions,� all of which he thinks makes no sense.

Bottom line, Sprint’s CEO Dan Hesse will face increasing scrutiny over what he will do, and Clearwire shares are cheap, in Piecyk’s view, as the spectrum assets alone that the company has licensed are worth more than the current enterprise value of Clearwire.

Sprint shares today are up 10 cents, or 4%, at $2.60, while Clearwire shares are down 4 cents, or 2.5%, at $1.54.

Update: Things change fast.

Two bits of news have allowed Clearwire stock to soar 17% in the last few minutes, currently up 25 cents at $1.83.

Dow Jones Newswires’s Greg Bensinger this afternoon reports that a UBS client note argues that Clearwire will, indeed, make the $240 million payment tomorrow. The $700 million in cash and investments the firm has, plus $110 million paid to it recently by Sprint, gives the company adequate liquidity to make the payment.

In addition, a Reuters report this afternoon cites multiple anonymous sources as stating that Clearwire is expected to reach a funding agreement with Sprint “by year end,” and that it might allow tomorrow’s coupon payment to proceed.