Sprint To Revive WiMax Venture
Wednesday, May 7, 2008
Sprint Nextel plans to announce as early as today a joint venture with Clearwire to build a nationwide wireless network to provide high-speed Internet connections for laptops and cellphones, according to several sources familiar with the talks.
The WiMax network would cover big areas of the country, extending much farther than the local hot spots associated with current WiFi networks.
The venture is expected to be valued at about $12 billion, including assets committed by both companies as well as a total of $3.2 billion in cash investments from cable giants Comcast and Time Warner and Silicon Valley powerhouses Google and Intel, according to the sources, who spoke on the condition of anonymity because the deal hasn't been officially announced.
Sprint and Clearwire have attempted to partner on such a venture before, but an agreement fell apart last November as financial and management turmoil unfolded at Sprint. The company's new chief executive, Dan Hesse, had promised to revive the deal.
Sprint is to own 51 percent of the new company, which will be called Clearwire and led by Clearwire's chief executive, Benjamin Wolff, according to one source familiar with the agreement. The company is likely to be headquartered at Clearwire's offices in Kirkland, Wash., a source said.
Clearwire executives were at Sprint's headquarters in Overland Park, Kan., yesterday to finish details of the deal that will be announced as early as today, another source said.
The long-rumored venture could help Sprint overcome the financial and subscriber woes that have plagued it since the 2005 merger with Nextel. Sprint lost 1.2 million subscribers in 2007 and reported a $29.45 billion loss in the fourth quarter. The sources said the Clearwire venture would give Sprint a head start over telecommunications providers Verizon Wireless and AT&T in building a high-speed WiMax network.
Yet it is a risky and expensive bet that the company has struggled for years to get off the ground because of its technical complexity and lack of funding. The technology has not been demonstrated on a large scale, and critics have been skeptical of the cost and difficulty of building a network of towers to carry the WiMax signal across the country.
But those involved in the deal said they saw value in using Sprint's spectrum holdings for the network that would allow uninterrupted high-speed access to online videos, e-mail, and music over cellphones and other devices.
"Sprint and Clearwire have nationwide spectrum that is very broad and deep," one source said. "This is a very prudent investment and cost effective."
Investments include $1.05 billion from Comcast, $1 billion from Intel, $550 million from Time Warner, $500 million from Google and $100 million from smaller cable operator Bright House, sources said. The news was reported yesterday afternoon on the Wall Street Journal's Web site.
Cable companies have aggressively pushed into wireless and other phone services to compete with traditional carriers. Verizon and AT&T have recently acquired massive new holdings of valuable radio spectrum in a federal auction, which has widened their lead over other wireless competitors.
Google has been actively involved in telecommunications policy, by successfully persuading the Federal Communications Commission to auction a swath of spectrum recently with the condition that it be deployed as an open network for all devices.
As the Internet becomes more accessible through wireless devices, the company has worked to ensure it can sell ads through its search engine, maps and other applications on as many future mobile devices as possible, analysts said.
"For Google, it's about getting more clicks and eyeballs from more people," said Julie Ask, an analyst at Jupiter Research.
Roger Entner, an analyst at IAG Research, said the deal illustrates the urgency Hesse has felt to overhaul Sprint.
"What this means for Sprint is that it unlocks a tremendous asset," Entner said, "through a partnership of blue-chip companies that are providing enough liquidity to give it a very good shot of making it."