By Kim Hart
Washington Post Staff Writer
Saturday, November 10, 2007

Sprint Nextel and Clearwire said yesterday they were calling off their joint plan to build a national high-speed wireless network using WiMax technology, dealing another blow to Sprint as it struggles to regain its footing.

Sprint has pitched WiMax as core to its strategy, promoting it as a way to let customers surf the Internet on laptop computers, cellphones and other portable devices at speeds up to five times faster than current cellular networks offer.

In a statement, the Reston company said it was reviewing its WiMax business plans, though it "remains fully committed" to the technology and is on track to make it available in Washington, Baltimore and Chicago by the end of the year.

The decision to cancel the partnership came a month after Sprint chairman and chief executive Gary Forsee resigned under pressure from board members and investors. Sprint, the country's third-largest wireless carrier, has lost more than a million subscribers over the past year as it has struggled to repair network and customer service problems.

Sprint and Clearwire signed a letter of intent in July to pool their resources to build the WiMax network, but the project fell behind schedule when an official deal was not finalized. The companies could not resolve the "complexities" associated with the agreement, Sprint said in the statement.

Sprint said it expects to collaborate with Clearwire on other WiMax opportunities, such as roaming on each other's network.

"The real question is where mobile WiMax will go now that Sprint is hobbled in the market," said Scott Ellison, vice president of mobile and wireless communications at IDC, a market research firm. "Now Sprint has to go it alone."

Forsee's $5 billion gamble on WiMax was harshly criticized by analysts and investors. The technology is considered risky because it has never been used to build a mobile network.

WiMax works similarly to WiFi, which allows people to surf the Internet when they are within several feet of transmitters. WiMax extends that service for miles. But building enough cell towers to make a seamless connection for people to use as they drive down a highway, for example, is expensive and technologically difficult, analysts said.

Sprint and Clearwire, based in Kirkland, Wash., both own large swaths of airwaves suitable for WiMax, and joining forces would have allowed the companies to build a more complete network. Some analysts said the companies may struggle to build a network on their own.

Clearwire delayed signing a formal agreement when it became clear that Forsee's days were numbered, according to sources familiar with the situation, who spoke on the condition of anonymity because they were not authorized to speak about the negotiations. Without a permanent chief executive at Sprint, the details of a deal were more difficult to hammer out.

When the partnership was first conceived last summer, Forsee and Clearwire chief executive Ben Wolff expected to reach an agreement within two months. "Clearly we were wrong," Wolff said yesterday during Clearwire's conference call on third-quarter earnings.

The number of towers each company should build and the pace of the network's deployment were among the unresolved details, sources said.

Clearwire, founded by wireless pioneer and early Nextel investor Craig McCaw, has built a wireless broadband network in two dozen markets. It said trouble reaching an agreement with Sprint has delayed deployment of its own WiMax network in some markets.

Wolff said the company needed "to be free to pursue other strategic opportunities that further Clearwire's goals and objectives . . . which may or may not include Sprint in the future."

Last week, Sprint's interim chief executive, Paul Saleh, said the company would not spend as much as expected on the WiMax project through the end of the year.

"Investors overall have been skeptical about WiMax as a strategic initiative, so there is potential for Sprint to slow its involvement," said Michael Nelson, an analyst for the Stanford Group. "I still expect Sprint to follow through on WiMax, but maybe to a lesser degree than they previously anticipated."

Clearwire's shares dropped 25 percent yesterday to close at $13.49 after the announcement. Sprint shares closed at $16.31, down 1.39 percent.

The delay is also a setback for companies such as Intel and Motorola that have invested heavily in the technology. WiMax-enabled laptops and cellphones may not hit the market as soon as anticipated, said George West, president and senior analyst of West Technology Research Solutions in Mountain View, Calif.

"It's not the death knell of WiMax, but certainly a sign that it's a little farther out that we'd been expecting," he said.