NEW YORK-Following months of speculation, Sprint Nextel Corp. announced agreements with four cable companies to provide wireless services using Sprint Nextel’s nationwide network. Comcast Corp., Time Warner Cable, Cox Communications and Advance/Newhouse Communications, which serve a combined 41 million customers, will use the network to sell bundled services. Sprint Nextel serves more than 45 million total customers on its wireless networks.
The joint venture, which is mutually exclusive for three years and has a 20-year term, calls for a combined financial investment of $200 million split evenly between Sprint Nextel and the four cable companies. The financial resources will be used to fund the development of converged services, national marketing initiatives and back-office integration.
The cable companies said they plan to begin offering wireless services next year to their customers as part of a quadruple-play offering that combines video, wireless voice and data, high-speed Internet and cable phone service. Sprint Nextel began trialing wireless services with several cable companies in select markets earlier this year.
The wireless service will take advantage of Sprint Nextel’s recently launched CDMA2000 1x EV-DO network with the cable companies planning to develop new co-branded gadgets integrating cable and wireless services in a single device. The device is expected to allow customers to seamlessly access their e-mail, home and mobile voicemail, program a Digital Video Recorder and access photo programs.
The device and services are expected to be sold through Sprint Nextel’s 1,600 retail outlets, cable retail outlets and other third-party distributors, including RadioShack Corp. locations.
Sprint Nextel noted the deal will differ from its mobile virtual network operator partnerships in that the companies participating in the venture will retain full economic benefits of the acquired customers. Sprint Nextel counts customers added through MVNO partnerships as wholesale net additions instead of direct net additions.
The cable companies will be responsible for billing customers and for customer service in their territories, though pricing of the integrated offerings will be a joint decision between the local cable company and Sprint Nextel.
The companies also said they plan to work together on developing next-generation services using Sprint Nextel’s substantial 2.5 GHz spectrum holdings to further integrate wireline and wireless services. Sprint Nextel is in the process or has completed several technology trials using its 2.5 GHz spectrum. Those trials include UMTS TDD, Flash-OFDM and several variations on WiMAX.
Analysts noted the deal appears to benefit all parties involved.
“For both Sprint and cable, this looks like a strategic partnership to offer a more compelling product, increase distribution and reduce churn rather than just one company providing access to the other,” noted Bear Stearns & Co. Inc. analyst Phil Cusick.
Sprint Nextel’s stock was trading up more than 3 percent early Wednesday at $24.60 per share.
