With the launch of WiMAX trial markets just weeks away, Sprint Nextel Corp. says it is re-examining its WiMAX business plans and has abandoned a partnership with Clearwire Corp. intended to promote a faster, cheaper deployment of the mobile broadband technology.
Sprint Nextel said the decision late last week to terminate a letter of intent with Clearwire signed in July was mutual, as “the two companies could not resolve complexities associated with the [letter of intent] and failed to reach final agreement on the terms of the transaction.”
The letter outlined a grand plan for national deployment of a WiMAX network, with Sprint Nextel footing the bill to cover 70 million potential customers and Clearwire covering 30 million pops by the end of next year. With the departure of former Sprint Nextel CEO Gary Forsee, Sprint Nextel’s WiMAX plans had been in question; the company’s acting CEO, Paul Saleh, has emphasized simplifying the carrier’s business and making further commitment to customer care in order to try to reverse the wireless carrier’s customer losses.
Back to the drawing board
Pali Research analyst Walter Piecyk said it was possible that Sprint Nextel
could decide to build out the 30 million pops that Clearwire was to cover-Sprint Nextel had originally planned to build out the 100 million pops by itself-but that would cost Sprint Nextel another $1 billion.
“This is clearly a negative development for the rollout of WiMAX in the United States and the vendors selling that equipment,” Piecyk said.
Remains committed
Sprint Nextel said it “remains fully committed to developing WiMAX services and deploying a WiMAX network that will allow customers to realize the benefits of a mobile broadband Internet experience.” It added that it expects to continue working with Clearwire “on future opportunities to enhance deployment of robust WiMAX capabilities through ongoing discussions that include the possibility of roaming, frequency interference coordination, spectrum exchanges, technology evolution and development and network standards.”
Sprint Nextel’s president of strategic planning and corporate initiatives, Keith Cowan, affirmed that the company is still on track to soft-launch its Chicago and Baltimore/Washington D.C. markets late this year. The company said it is reviewing its WiMAX plans and expects to comment on them in more detail sometime early next year.
Operational challenges
“What’s going to be more important in terms of next steps is what Sprint is going to do in terms of improving their business performance on the CDMA front, and what that means for their investment on the WIMAX front,” said research manager Ozgur Aytar of Pyramid Research. She noted the companies have not ruled out roaming relationships, which will be important as WiMAX competes with other mobile broadband technologies.
“The relationship was valuable in the sense that it would add to the momentum for WiMAX and increase the reach of the network quicker,” Aytar said. The failure of the deal, she said, “just slows down their WiMAX network-building-more so for Clearwire than Sprint, because Sprint was already going to do the majority of the buildout.”
If Sprint Nextel does slow down its WiMAX plans, one of the advantages the company has frequently referenced-time to market-may be lost.
Complexity cited
For its part, Clearwire said as part of its third quarter earnings release that it and Sprint Nextel are still figuring out how best to collaborate. Clearwire said that it and Sprint Nextel “concluded that the joint build transaction originally contemplated by the . letter of intent was likely to introduce a level of additional complexity to each party’s business that would be inconsistent with each company’s focus on simplicity and the customer experience.”
“Discussions continue regarding the best means to accomplish the benefits that were expected under the letter,” Clearwire said. “Notwithstanding the ongoing discussions, there can be no assurance that a transaction or agreement between Clearwire and Sprint Nextel will be concluded.” The company added that its rollout of some new markets has been put on hold.
