Sprint Nextel Corp. is determined to push WiMAX into existence and then ubiquity, and the company may explore a range of financial and strategic options in order to make that happen, CEO Gary Forsee told an industry conference last week.
Forsee said that he has been “very clear . that there are opportunities for us to do a number of things, strategically and potentially financially, that could ensure that the business plan is achieved, that the technology is ubiquitously deployed, and financially that our shareholders could perhaps see some benefit of that before waiting the four or five years before the business would return [a profit.]”
Potential partners
Forsee added that Sprint Nextel would consider working with several kinds of companies that might be interested in making an investment in WiMAX: companies with a “self-interest in seeing WiMAX deployed,” such as the vendors and partners that the carrier is currently working with; companies who could “bring tonnage” (read: usage) to the network under wholesale arrangements; or companies that are interested in helping build a WiMAX network to help ensure ubiquity of coverage.
Cliff Raskind, director of global practice wireless for Strategy Analytics, opined that “seeking new sources of capital and spreading risk will buoy Sprint Nextel’s share price and placate nervous shareholders wondering how the company will build out so many (potentially overlapping) technologies on so many fronts, amid sagging quarter-on-quarter financial performance metrics.”
The Wall Street Journal reported that Sprint Nextel is in conversations with Craig McCaw’s Clearwire Corp. to potentially spin off its WiMAX operations, due to pressure from shareholders who are nervous about the cost of the infrastructure investments while the company’s traditional wireless customer metrics are still lagging. Such a deal might encompass a spinoff or a less far-reaching partnership such as a roaming agreement or spectrum acquisition from Clearwire, the WSJ reported, citing anonymous sources familiar with the matter.
Raskind said that in the long-term, if Sprint Nextel and Clearwire were to partner and build a single, national WiMAX network, “the possibilities for providing very low-cost/very open access create potentially boundless [mobile virtual network operator] possibilities-provided the device economics line up.”
For his part, Forsee noted that Sprint Nextel has experience in various structures, from joint ventures to spinoffs, and that the company would “look at all of those opportunities” as well as at keeping the operations on the carrier’s own balance sheet.
“We believe this is part of the future of the company, and maintaining control is going to be very important,” Forsee said.
Tom Elliott, VP of North American consulting for Strategy Analytics, said it would make sense if the WiMAX network ended up being “a way of extending the MVNO/JV relationship with the big [cable companies],” particularly since a wholesale arrangement of some kind could offer a big advantage to the cable MSOs that “need some way of upping the ante against the telcos.” However, he thought that cable was unlikely to purchase the network outright from Sprint Nextel-and he felt Clearwire was still a risky venture that Sprint Nextel might not want to yoke itself to. Sprint Nextel does have the advantage in that it has been fairly vague in specific services that it wants to offer via WiMAX, Elliott said-so if their strategy changes, re-positioning probably won’t be too difficult.
The decision on WiMAX “is not a no-brainer, like ‘Yeah, let’s get rid of this dog,'” he said. “Their way out of the woods is not obvious.”
Q2 comments
Foresee also seemed to hedge when asked about the carrier’s numbers for the second quarter. Company executives have assured analysts and investors for some time that the carrier would dig its way out of losing postpaid subscribers and turn in positive numbers as well as reducing churn starting in the second quarter of this year. Forsee said last week that Sprint Nextel would be “at or near” positive postpaid numbers, and noted that the sequential improvement of getting near positive would be substantial, particularly in the seasonally slower second quarter. Sprint Nextel has said it expected to achieve a churn rate of less than 2% at some point this year; Forsee said that churn would be at or near that figure for the second quarter.
