TERMINATING A LETTER OF INTENT-as Sprint Nextel Corp. and Clearwire Corp. did Nov. 9-doesn’t lend itself to gauging possible impacts to Sprint Nextel’s ambitious, multibillion-dollar WiMAX plans. Assessing impacts to suppliers is even more perilous, according to analysts.
Sprint Nextel appeared to send mixed signals in its Nov. 9 statement, however, combining a reiteration of commitment to WiMAX with the statement that it is “reviewing its WiMAX business plans and outlook” and would comment further “early next year.”
Given that the carrier is seeking a new CEO and is losing subscribers, many leapt to the conclusion that a review equated to a pull back. Thus speculation on the impact to suppliers, which include Motorola Inc., Samsung Electronics Co. Ltd. and Nokia Corp., among others.
But a handful of analysts were divided over whether Sprint Nextel might be reviewing WiMAX’s fate, its business model and timetable for deployment or simply fumbled the signals it intended to send. Most agreed that much rides on Sprint Nextel’s new CEO and their commitment to WiMAX. The industry is all ears for further word.
(Sprint Nextel last week reiterated its public stance. See sidebar.)
In a vacuum of hard information, however, speculation has turned to the potential impacts of any waffling on a wide ecosystem of suppliers and partners.
Ongoing obligations
Analyst Nadine Manjaro at ABI Research said that she worked at Sprint Nextel on its WiMAX program until six months ago and is confident that the carrier has contractual obligations for specific levels of network spend and handset volume purchases. Any pullback would be disastrous for its credibility and its legal and financial standing, not to mention its suppliers, she said.
“I know Sprint has contracts with Samsung, Motorola and Nokia-multi-year agreements,” Manjaro said. “I don’t know if they’re worth $5 billion.”
Manjaro said-and her fellow ABI analyst Philip Solis agreed-that Sprint Nextel is on track with WiMAX and simply dropped Clearwire as a possible impediment to the speed of deployment, for technical reasons.
With Clearwire fading or gone, however, Sprint Nextel will need investors and, Manjaro speculated, that’s where Google Inc. or cable companies might enter the picture. Sprint Nextel conceivably might spin off its Xohm unit in concert with a new equity partner, Manjaro said.
Device rollouts
The carrier’s plan for rolling out devices remains intact, according to the analyst. That rollout begins soon with Intel Corp.’s embedded WiMAX modules for laptops; external data cards from Samsung and ZTE Corp.; Internet tablets from Nokia; home modems from Samsung; and, in 2008-2009 or later, dual-mode handsets from a variety of sources. The pantheon of WiMAX-enabled consumer electronics devices-the piece that has captured the imagination as well as stimulated skepticism-is expected in a long, gradual phase that is years away, according to analyst Walt Piecyk at Pali Research.
Piecyk disagreed with Manjaro’s view of supplier contracts. He said Sprint Nextel is not obligated to buy WiMAX network gear and, therefore, the forecast called for pain.
“WiMAX will move forward, it’ll just be a lot slower than anticipated a month ago,” Piecyk said. “The primary impact here is on the network suppliers. The money to be spent on WiMAX in 2008 was primarily on the infrastructure side of things.”
Jane Zweig, CEO at The Shosteck Group, has been skeptical of Sprint Nextel’s consumer-based WiMAX plans and she viewed the Sprint Nextel-Clearwire news in light of Sprint Nextel’s larger challenges.
“It’s probably fair to say there will be a slowdown and reassessment (of Sprint Nextel’s WiMAX plans) as a new CEO steps in,” Zweig said. “A new CEO will want to review everything: WiMAX, iDEN, Sprint’s CDMA operations, joint ventures with cable.”
“The goal will be to stop the bleeding while AT&T and Verizon laugh all the way to the bank,” Zweig said. “I think we’ll see slowdown in the WiMAX buildout.”
Infrastructure providers, particularly Motorola, must be nervous, Zweig said. “The network business is cutthroat and WiMAX represented a boon to Motorola and Samsung, which don’t have other (nextgen) plays. If you look at who’s backing this, they’re not doing well on the infrastructure side.”
Zweig said that Sprint Nextel “backed itself into a corner” with its WiMAX plans, which simply was the most mature next-gen technology when Sprint Nextel gave the federal government assurances on its intended use of its 2.5 GHz spectrum.
“They had to put a stake in the ground before anything was really ready,” she said. “WiMAX, like every technology, will go through a pain phase.”
Peter Jarich, analyst at Current Analysis, said that while Sprint Nextel’s statement on its de-coupling from Clearwire was clumsy and ambiguous, all is speculation until the carrier gets a CEO onboard and clarifies its direction through its actions.
Many observers suggesting a Xohm spinoff don’t understand that Sprint Nextel, by leapfrogging ahead to a next-gen technology such as WiMAX, is making WiMAX its core business, Jarich said.
“While the Sprint and Clearwire news appeared to be a step back,” Jarich said, “the fact is, both companies will probably move forward with their plans and may play together eventually.”
