Clearwire outsources network management to Ericsson to save cash

Clearwire cut a seven-year pact with Ericsson to manage its network in a move that should give the cash-strapped WiMax 4G provider some wiggle room.

Clearwire on Wednesday cut a seven-year pact with Ericsson to manage its network in a move that should give the cash-strapped WiMax 4G provider some wiggle room.

Under the pact:

  • Ericsson manages Clearwire's 4G network day-to-day.
  • 700 Clearwire employees become Ericsson workers in the middle of 2011.
  • Ericsson will be responsible for network engineering, operations and maintenance.
  • Clearwire will still make the calls on network assets and strategy and owns the network.

If this move sounds familiar that's because Sprint has a similar arrangement with Ericsson. In fact, Clearwire will be the second managed services contract for Ericsson in the U.S. Ericsson has a bevy of similar deals around the world.

Clearwire didn't reveal how much the Ericsson deal will save, but the move is likely to help the company cut expenses. Clearwire reported its first quarter earnings earlier this month. The company reported a loss of $226.96 million, or 93 cents a share, on revenue of $242 million.

As of March 31, Clearwire had cash of $1.2 billion , down from $1.74 billion as of Dec. 31. Long-term debt topped $4 billion as of March 31.

The good news is that Clearwire also added 1.8 million net subscribers as the company made a lot of progress on its wholesale business plan. Clearwire also forged a deal with Sprint to solidify its future revenue stream. For 2011, Clearwire is projecting 9.5 million subscribers.

Analysts said Clearwire's first quarter was a good start, but the company still burned through $472 million in the first quarter, according to Stifel Nicolaus analyst Christopher King. That burn rate is down from the $1.2 billion burned in the fourth quarter.

In addition, Intel Capital and Eagle River said they will sell 10 million shares in Clearwire. The disclosure was made last week in SEC filings.