NEW YORK ― Clearwire Corp has chosen Ericsson to take over management of its high-speed wireless network to help it cut costs, the service provider said Wednesday.
The seven-year agreement is similar to an arrangement which Clearwire’s majority owner Sprint Nextel has with Ericsson, causing some analysts to suggest that it might lead to a closer tie between Sprint and Clearwire.
Under the deal, Clearwire said it will transfer 700 of its 3,600 employees to Ericsson, but will continue to own the network.
Clearwire said the agreement will help cut costs, but the company would not disclose details on the financial impact or the terms.
Handing over 700 employees could cut as much as $70 million of Clearwire’s annual expenses, according to Nomura Securities analyst Michael McCormack.
Clearwire’s adoption of a similar network management agreement to Sprint’s could mean that the companies are getting ready for a closer relationship, he said.
“While the optics of further equity investment or eventual consolidation would be likely negative for Sprint shares, we think it is the right decision,” McCormack said.
Sprint and Clearwire, which needs more funding to expand its network, have said that they have been discussing letting Clearwire use Sprint’s wireless towers to expand its service.
Clearwire did not disclose the terms of the Ericsson agreement or how it relates to the Sprint talks.
Clearwire shares were up 5 percent at $4.49 on the Nasdaq on Wednesday morning. Sprint shares were up 1.4 percent at $5.18 on the New York Stock Exchange.